Housing: Recognizing Market Realities

No major industry has been hit harder than housing by Washington's fight against inflation. By tightening credit, the Federal Reserve Board has sharply cut the supply of mortgage money; over the past twelve months, starts of new homes and apartments have dropped by 25%. Last week the Administration reluctantly raised the interest-rate ceiling on Government-backed home mortgages in an effort to draw more funds into homebuilding. The rate went up from 7½% to a record 8½%, effective this week, for Federal Housing Administration and Veterans Administration home loans. Because FHA borrowers must also pay a ½% insurance fee, the actual...

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