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REAL ESTATE
AND
NEW YORK, NOVEMBER 21, 1914
I UPWARD TREND OF MARKET STARTED |
I Many Factors Which Hung Over Situation Dispelled and Big
I Business Interests Look for Greatest Boom in History of Country
4<T AST month I was pessimistic, two
â– L-i weeks ago I saw a betterment in
conditions, but now I am an optimist
and feel that the turning point has
come and that general business condi¬
tions throughout the country are on the
mend." Roger W. Babson, the well
known statistician, expressed himself in
these terms last Thursday evening, and
in so doing has reflected to a very large
extent the general pulse of the mercan¬
tile field throughout the United States.
There are a large number of people
who have not the foresight and ability
to realize that the turning point in the
depression actually came and was passed
last August, and others, while they real¬
ize that the lowest ebb may have been
passed, still do not see any prospects
for immediate improvement. The gen¬
eral, silent hope of most business men
is for a steady, healthy and normal in¬
crease in the volume of business, with¬
out any dangerous upward rush, so that
the after effect, when the reaction sets
in, will not be too severe.
Trade Fluctuations.
It is a well defined principle that
what goes up must come down, and
in looking over the various trends during
the last ten years this is very appar¬
ent. In 1904 there was a serious de¬
pression in general business conditions,
but toward the latter part of 1905 the
situation changed and the upward swing
started and lasted until February, 1907,
when another change occurred, the
panic ensuing. In March, 1908, another
upward movement started, lasting until
1910, after which two years and a half
of normal conditions prevailed, fol¬
lowed by the decline, which culminated
last August, after the declaration of
war.
In speakip^ of the present situation
and the outlook, Mr. Babson said:
"Fundamental conditions show distinct
improvement. Tliere are several rea¬
sons t^ form this opinion: (1) The tre¬
mendous crops, together with the
splendid prices paid abroad for grain,
the increase in Kansas crops and in
some other States since the war was
declared. (2) The Federal Reserve law,
which went into efifect this week. Prob¬
ably few realize that $400,000,000 in gold
will be released as reserve. The loan¬
ing capacity will be enormously en¬
hanced. For every dollar released, a
borrowing capacity of five dollars is
created, or. in other words, a total in¬
crease of about $2,000,000,000. Of
course the 'time is coming when we
must pay for this inflation, and pay
dearly, but. in the meanwhile, I look
for the greatest boom that the country
has ever witnessed; (3) railroads are
going to get their increases in rates. I
could not get those in Washington to
talk upon the subject until a few weeks
ago. but it is now clearly known that
the President and his Cabinet are going
to do everything that is consistent to
put the increase into effect.
"The question has been asked, 'What
recourse has the President in the event
of the Inter-State Commerce Commis¬
sion refusing to grant the increase?'
During the last month the gen¬
eral business conditions through¬
out the country have so shaped
themselves, that the "Big Busi¬
ness" interests are reversing their
position and now consider that
one of the biggest booms that the
country has ever known is about
to be launched. Real estate has
been a sufferer during the depres¬
sion, the financial situation being
the principal influencing factor.
With the easing of monetary con¬
ditions and renewed confidence on
the part of the investment public,
realty will once again come into
its own.
The President can go to Congress and
ask that the Commission be augmented.
(4) The last election was decidedly
beneficial. The results will put both
parties on their good behavior.
"While foreign export business is de¬
sirable and there is every chance of in¬
creasing the South America trade, still
we must not lose sight of our own
country. With one-sixteenth of the
surface of the globe, the United States
provides 60 per cent, of the total corn
grown, 61 per cent, of the cotton, 63
per cent, of the petrol, 55 per cent, cop¬
per. 42 per cent. iron. 35 per cent, to¬
bacco. 40 per cenl;. coal, 30 per cent.
lead, 28 per cent, silver and 20 per cent,
of the gold. The possibilities of de¬
veloping these industries is stupendous.
The decrease in idle cars is also most
important and shows the trend. The
passing of the English moratorium is
another forward step. While that was
in force, we had to pay, but could not
collect. The reserve of the Bank of
England has increased from £138,000,000
to £243.000,000.
Uplift in Bonds.
"During the last ten days, I am in¬
formed that there has been a more
rapid increase in the price of bonds
than at any time during the last twenty-
two years. The tide has turned, and
while it does not mean prosperity next
week, still we have started to climb the
hill."
During the period of commercial de¬
pression, real estate has also been a
sufferer. During the week the Record
and CJuide canvassed the brokerage
field and prints a number of interviews
with leading brokers, who give their
opinion on thc outlook:
Charles Griffith Moses, of thc J. Ro¬
maine Brown Company, said: "While
the lack of funds for mortgage invest¬
ment has had the effect of curtailing
new building enterprises to a large ex¬
tent, the result is not altogether unsat¬
isfactory. We are usually pretty well
supplied with enough residential and
commercial space to take care of any
normal renting demands in New York,
anrl when this supply is ample the com¬
petition for tenants is so keen that own¬
ers and agents are forced to make con¬
cessions of one kind or another to fill
up their buildings. The growth and ex¬
pansion of the city, however, is so rapid
that a very few months of inactivity in
new building causes the demand to ex¬
ceed the supply, resulting in a stiffening
of rentals and a consequent benefit to
the owners.
"The recent tremendous shrinkage of
values and income on stocks and bonds
has caused many investors to turn to
real estate for safe and profitable in¬
vestment, and with the opening of the
stock niarket enabling people of means
to dispose of such securities, there
should be a very satisfactory real es¬
tate market. The chief business at
present is largely exchanging of equi¬
ties along the lines of consolidation of
separate small and unimproved pieces
for one modern apartment or commer¬
cial building to be held as a permanent
investment. This form of trading is
good for the market and shows a
healthy condition of affairs. In spite of
several months of comparative inac¬
tivity the prices and values of good
properties arc holding firm with strong
indications of having a good market in
the near future."
In the Trade Districts.
Frank 11. Lord, vice-president of
Daniel Birdsall & Co., Inc.: "We con¬
sider that the liquidation of over-mort¬
gaged and under-rented property has
about run its course, and that unsettled
condition of the various trade districts
of the city has nearly reached its end.
We believe that within twelve months
there will be abundant evidence that
real estate has not lost its position as a
premier investment. The public has
learned that the old theory *that stocks
and bonds can be liquidated at an
h.our's notice' is more or less untrue at
all times and especially so when a sup¬
ply of nioney is most necessary. The
prime requisites for a full return of con¬
fidence in real estate are that the pub¬
lic shall understand its socialistic at¬
tacks on realty (which includes the
'single tax' craze) stand no chance of
succeeding in this state and that the
municipal government is striving hon¬
estly to reform the tangled condition of
its assets, its valuations and. its ex¬
penses."
Wright Barclay: "I do not look for
any great revival of business in real es¬
tate until the foreign situation is suf¬
ficiently improved to warrant the re¬
opening of the New York Stock Ex¬
change and the loaning institutions de¬
cide to place more money at the dis¬
posal of real estate owners for invest¬
ment in niortgaces. I then believe there
will l)e a considerable demand for real
estate, particularly of an investment
nature, as much money heretofore in¬
vested in stocks and bonds w^ill be di¬
verted to real estate.
"A great deal depends, however, upon
the new real estate tax rate for the year
1915. as most of the modern improved
properties are carrying now all the taxes
they can stand, and in order to have a
great demand for such properties, the
fixed charges and maintenance expenses'
must be kept down, so that the proper¬
ties can be made to net from five to
seven per cent., as no property will be