mgr

AN ANALYSIS OF some ASPECTS
05 THE LANSING HOUSING MARKET

fixed: for the Degree of M. A.
Micz‘qzoA‘N STATE COLLEGE

Car! Bernard Brockway
' _ 1950

mutwuztlliguguuWWM. ~

____. __ _._"——'

This is to certifg that the

thesis entitled

"An Analysis of Some Aspects of the
Lansing Housing Market"

presented by

Carl B. Brockway

has been accepted towards fulfillment
of the requirements for

hf. A. degree in Economcs

@641 Mm

) Majdi/ professor

Date AuguSt 25; 1950

0-169

 

r“

 

MSU

LIBRARIES

 

 

 

RETURNING MATERIALS:
Place in book drop to
remove this checkout from
your record. FINES wiII
be charged if book is
returned after the date
stamped beIow.

 

 

 

 

AN ANALYSIS OF SCKE ASPECTS

CF THE LETSIITG HOUSII‘IG ILCLRICET

By

Carl Bernard Brockway

A Thesis

Submitted to the School of Graduate Studies of Hichigan

State College of Agriculture and Apolled Science
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS

Department of Economics

1950

THES'S

A C III“: C '.'-."L EDGE T

The writer wishes to express especial apprecia-
tion to Dr. haleigh Barlowe of the Amricultura Economics
Department of Hichigan State College for his original
suggestion of the tOpic and for his helpful criticisms
of the form and thought of the study.

Dean Herman Gyngarden gave many helpful sugges-
tions at the outset, and his doctoral dissertation, rhich
was used as a model, was an invaluable guide.

I wish to thank also all members of the Lansing
Board of Realtors, especially Mr. Stabbins of Advance
Realty and Er. Parfitt, for permission to collect and use
data on real estate prices.

Finally, this study would never have seen com-
pletion had it not been for the patience and aid, in all

phases of the writing, of my wife.

2.. 8810

TABLE OF CCNTENTS

Chapter Pa'e
I ILITRODUCTICBT . O 0 O 0 O O O O O O O O O I O O O 1
Purpose. . . . . . . . . . . . . . . . . . . 1
Importance . . . . . . . . . . . . . . . . . 3
scope O O O O O O O O O O O O O O O O O O O 5
Procedure. . . . . . . . . . . . . . . . . . 0
II AN ECCLCGICAL STUDY CF LAKSIXG, IICHIGAH. . . . ll

Purpose. . . . . . . . . . . . . . . . . . 11
Some theories of urban ecology . . . . . . . 13
Burgess Concentric theory . . . . . . . . 1M
Hoyt Sector theory. . . . . . . . . . . . 14
Firey Cultural theory . . . . . . . . . . S
The dynamics of Lansing's growth . . . . . . lo
An "historical" map . . . . . . . . . . . 16
Written history of Lansing. . . . . . . . l
The static structure in 19NO . . . . . . . . 2;
Limitations an'l precautions. . . . . . . . . 27
The six natural areas. . . . . . . . . . . . 27

III XETHCD USED IN CCNSTPUC"IN

#3
U]
H
Id
H
C)
I I1
U)
\JJ
0

IV THE SIX INDICES . . . . . .

\JJ
\0

High rent area . . . . . . . . . . . . . . . M

Iiiddle rent area . . . . . . . . . . . . . . ML
Low rent area. . . . . . . . . . . . . . . . MS
Transitional rea. . . . . . . . . . . . . . 9a
Negro area . . . . . . . . . . . . . . . . . 5s
_ast Lansing area. . . . . . . . . . . . . . 60
Comparison of the Mn lice

Q?

0)

o

o

o

o

o

o
O\
.1:

V CCXPAP ISO‘ "IT" “.TD ATALYSIS CF FACTORS
INPLUB 'ICII"G P?5.L ESTATE PPIC ES . . . . . .

General price level and housing prices . . . 71
Construction costs and housing prices. . . . 75
Supply and demand and housing prices . . . . 82
VI CCKCLU WI . . . . . . . . . . . . . . . . . . . 97

VII BIBLIOGRAPHY. . . . . . . . . . . . . . . . . .107

I l
VA Il‘lll‘l l
I [I]! ll ‘ll‘ll‘[

;.

\\'|l|.|

uIII\

.............

..........

Chapter I

INTRODUCTICN

Purpose

The primary aim of this paper is to analyze the
Lansing housing market — to study the demand, supply and
catalytic factors which influence prices of used houses in
the real estate market with the purpose of predicting in
broad outline the future trends of real estate prices. A
secondary but important purpose is to study the interre-
lationships of various housing market factors over time.
This latter mentioned aim is, of course, imperative to the
accomplishment of the first. For two reasons it may seem
presumptuous to claim as one purpose the predicting of
future trends in the market: (1) the complexity and in-
tangibility of the factors that must be considered, and
(2) the fact that numerous qualified experts already are
making housing and real estate price forecasts.

Regarding the first of these reasons, it is recog-
nized that completely accurate predictions of future trends
cannot be made in any field of economic activity and es-
pecially not in the field of real estate. However, since
Judgments as to future conditions of the market are being
made and acted upon every day, it is not a case of perfect
prediction or no prediction, but rather a question of pre-

diction by guess, hunch, and rule of thumb or by analysis

of some of the influencing factors in the past to determine
some of their interrelationships and trends. A careful and
systematic study of the latter information should provide
a more depends le basis for decisions than the former me-
thod.

As regards the second factor (i.e., there alreaCy
exist experts who attempt to predict future trends in the

market) it is true that there are a few organizations who

are concerned with this problem, but their analyses are

almost entirely on a national basis while one of the unique
aspects of the housing market is its local nature. The de-
manders, that is, the buyers and renters, of housing are»
confined to one particular locality, a city or metropolitan
area. People do not usually move great distances in order
to obtain lower rents or prices on real estate. Since the
incentive toward mobility for most of us is the employment
motive, if we find that we have a secure job in one place,
we are not likely to JeOpardize our status by moving to
some other city Just because rent happens to be $10 a month
cheaper. It is therefore necessary for the analyst of hous—
ing demand to work with local market data rather than with
the statistics of a whole state or nation. One authority,
in discussing housing research, states, “Statistical series

on a national basis are of limited usefulness, and, in fact,

can be misleading if applied unqualifiedly to local situations."1

 

1 Richard U. Ratcliff, Urban Land Economics, (New York, 1949),
p. 459.

 

Importance

The real estate market is a very important aspect
of our economy. It involves both a large amount of invest-
ment funds and many people. Most people make one of the
most important financial decisions of their lifetime when
they buy a house. They not only commit most of their past
savings, but also inneny cases a good part of their future
income will be earmarked for this purpose. Should both
house prices and incomes depreciate by fifty per cent during
the period that the buyer is paying for his house, the pay-
ment schedule to which he has committed himself may consti-
tute a terrific burden — a burden that he cannot unload
without loss because of the reduction in selling prices.
On the other hand, could the laboring man know that market

C

O

nditions will remain stable in relation to incomes, per-
haps rising somewhat for a period of five years or so, he

might find it very desirable to risk buying a home.

There are many groups in addition to buyers and

sellers who would benefit from

RD

knowledge of the local mar-
ket. Government officials who are concerned with zoning,

city planning, public housing, et cetera, need to know mar-

O

ket conditions in order to carry out their duties Ind pro-
grams adequately. For example, a large public housing pro-
gram might well be timed to counteract the real estate cycle
rather than to intensify the peak. Among the reasons the
real estate broker has for an interest in knowinv the future

(3

prospects is in order that he may adjust his outlay of capital.

-4-

.-

Still other groups interested in the real estate market
are investors and subdividers.

Perhaps he most important reason for knowing
something of future conditions is in order to control and
modify fluctuations before they occur, that is, to practice
preventive rather than corrective measures. Great booms
and their accompanying busts are very detrimental to our
way of life, not only in the economic sphere, but also in
the political and social spheres. In order to function
smoothly any society needs a certain amount of stability.
In regard to the part that market information can play in
stabilizing the real estate cycle, one authority has the
followinp comment:

"One of the most effective methods for
contributing to the stability of the housing
market is to improve the flow of information
among the traders in the market. Prospective
consumers must know more about the offerings
in the market, about recent transactions,
about construction costs, and about trends
on both the demand and supply side. Prospec-
tive sellers and producers must be informed
on all the same points, with particular em-
phasis on the facts with respect to demand.

A freer flow of market information will not
cure all the market imperfections, but with-
in limits, it will help to direct production
to the points where supply is most urgently
needed, to check production before too great
a surplus is created, to rationalize the re-
lationship between market price and cost of
production, and to reduce the spread of mar-
ket prices for housing of similar facilities.
Certainty is the greatest of market stabilizers.
Certainty depends on predictability and, in
most areas of economic activity, prediction
must depend mainly upon an analysis of recent
trends and present market facts."4

 

t 3
F—‘I
OJ
P“
£2:
’"U
.p.
01
(IT

 

Scope

In 5~eot raphical area this stu;y will encom

'0
U)
U)

hansing and East Lansing. The city of East Lansins was

includ 3 because it appears to be an inte rel part of the

Lansing

a
, a

housing market. It is especially attractive as a
place of residence to the hiph inccse groups of Lansing
proper, and vice versa, ny st ufme ts and workers of East
Lansing reside in Lansing.

The time period covered by the real estate price

[.24

indices and other indices with which they will be comp
is fifteen years, from 1935 to 1950. This period was cho—
sen for two reasons: (1) because it seemed necessrry to

go back some years before the war in order to observe price
movements in a normal period before the influence of the

war, and (2) because most of the indices with ahich the price

indices were compared use the 1935—1939 period as a base.

lQZB or thereabouts in order tqat a whole business cycle

0
O
C
|._J
f
..
H3
4
(D
0‘
(1‘
(I)
:5
p
D
F"
C
r
(L
p;
. U
(D
O
03
C
U)
0
W
F"
:3
r‘.)
(I
(D
Fr.)
C.
0
(g,
0
H:
OJ
I
(‘1'
(‘3

As the title of the paper indicates, this is an

analysis of some of the factors of the Lansing housing mar-

 

ket. It would be almost impossible to include all of the
factors which might be deemed relevant in the housing market
analysis. However, it is felt that the major elements have
been included - statistics on real estate prices, popula-

tion, construction costs buildin; activity, incomes, and

the general price level es measured by the Bureau of Labor

Statistics' consumer price index.

Procedure

The first esse ntie 1 step was to divide lexsjn5
into cer rtei n homo eneous areas, in order thst their trends
could be compared and examined for si.nificent QlI-Ei€uC
The hypothesis was that there are certain forces HSiCh
oper rate to n he certsin areas essen iti ally different fron1
others. Some of these forces sre socio- economic differences,
racial and ethnic characteristics, geographical locetion
end culturel end institutional influences. The delineation
of these ereas is made in Chspter I, entitled "An Ecolo-

The second step was the finding of method to

CL)

construct the reel estrte price indices. Real estate is a
peculier commoc1ity and is not sus sceptiole to the orthodox

type of index construction. The method used was developed

C13

by Hersh n Wyn] r cen in doctoral dissertation. A complete

(‘1)

I

discussion of the method vsiJL be found in Chspter Ill. In

$4.,

essence it involves fir nding houses n.*hich hs ve been lis
more then once over the period considered end which heve
not been essentially changed by major improvement in order

thet there can be e comp rison of e rele .tively homOLenecus

product. In actuality, the complete nunlber of listings for

 

:3

Herman syn5. erden, An I dex of Loc 1 Feel Estate Prices,
n unpublished doctorsl dis rte icn, Tfnn rbor, l§£73,

up. 65-77.

 

 

:L’ ()1
O3!

each house is made into a separate index, and all these
separate indices are combined to form the final index.
After having defined the areas end found a method,

it was next necessary to collect the dots on prices. These

U

in. heal Estate Board

\.—I

were obtained from the files of the Len.

1

and from the Advance Realty Company.
There are several questions with which any collec-
tor of data for index numbers must be concerned. Is the

data accurate? Is it comparable? Is the sample represen-

3

tative, end is it a

(

.equate? The prime requisite for com-

(D

L")
(.11

DELI

U}

psrability is a homov uct. Perfect homosenEity

‘1,

pro
in the real estate market is impossible, but the method

used seems to insure the closest possible comparability.

It assumes, however, that those houses which have been es—
sentially altered by improvements be eliminated from con—
siderstion in the index. Unfortunately, the form in which
the data are available meke this determination practically
impossible. The data collected from the Advance Realty
Company were so filed that information on building permits
and comparison of photographs make it possible to eliminate
some of the houses from consideration. The info nation from

«nsing Boerd of Realtors did not permit any elimination

l”!
(‘1)

the
on this basis. Certain ones were eliminated when they seemed
to deviate too extremely from the average prices in any given
year. In other words, it was necessary to use the criteria
of "reasonableness". For this reason, the indices may well

have an upward bias.

Po 4.1 1P va
since the CctE we

*3

e taken directly from the files

.0

Cl real estate firms, they are accurate in the they were

(I:

obtained from a primary source. How ver, an element of

’Jo

na r to have sufficient

(3
(D

curacy does enter in because in ord

,J
kl
C‘I"
Q)
P
F“

t was often necessary to use list n;

J

prices rather than

1",}

0
so

5 al selling prices. Sellin”

'._2

prices were used in every
case where it was possible. In no case was a listing price
used in one year and a selling price in another on the same
house, since the two obviously would not be comparable. The
use of listing prices gives the index an upward bias. Some
writers have maintained that the listing price would probably
ell

nr

\3

price by a constant amount through all

*Jo

be above the

U)

time periods and that therefore comparison would still be

valid. Observation of the relationships between list price

-1

an selling price does not substantiate this conclusion.

At the beginning of an upswing in business selling prices

are even with list price. As the upswing of the cycle con-

tinues list prices begin to gain on selling prices nd final-

03

1y when selling prices begin to level off and go down, list

prices are reluctant to drop, and the gap b tween list price

I

(D

and selling price is greatest t this point.
As to the representativeness and adequacy of the

sample, the data were assembled by goinv

.3

through the material
in straight alphabetical order from A to Z. For the Ne“
and East Lansing areas every listing was examined, while in
the others the sampling was stOpped short of Z when it was

felt that an adequate sample had been obtained. In no case

-9-

did the sampling stop before the letter N had been reached.
In the middle income area for which the largest sample was
taken, 230 different houses with two or more listings for
each address were used, vhile in the Negro area vhich had
the smallest sample, 200 different houses were used.

All the important date upon Which the indices
are based are shown in the first part of Chapter IV. After
the area indices have been completed, they will be compared
and analyzed in the latter part of the chapter. The func-
tion of the comparison is to describe the differences vhich
exist and to determine vhether these differences were logi-
cal.

In Chapter V, a composite index of the six areas
is computed and then considered in conjunction with such
relevant housing market factors as construction costs, the
general price level, sugply, and potential demand, the
purpose being to analyze the relationships between these
variables over time. There are at least three reasons why
such an analysis would.be valuable: (l) to test imperi-
cally already existing theory in this field of economic
activity, (2) to attempt to discover new relationships
and generalizations which might be added to the economists'
store-house of knowledge in this field, and (3) to set up
certain quantitive relationships whiCh might be valuable

in predicting future movements of real estate prices.

-10-

In the concluding chapter of this study, some
attempt is made to predict in broad outline the probable
future course of real estate prices. The vehicle used
for this task is an analysis of probable future movements
of the related factors. Different sets of assumptions
are made in T858?d to future oevelopments on the inter—
national scene and separate analyses and conclusions

reached under each set of assumptions.

Chapter II

AN ECOLOGICAL STUDY OF LANSING, KICHIGAN

The hypothesis upon which this chapter is based
is that real estate prices may vary considerably between
certain areas of the city, and that to make separate in-
dices for these "natural" areas would be important in the
analysis. In selecting “natural" areas, one is faced with
a multitude of criteria which could be used to determine
them. Those to be chosen, of course, depend upon the pur-
pose for which one wishes to delineate the areas. Since
this problem deals with real estate prices, a socio-econo-
mic index is of primary interest, although cultural fac-
tors are important also and may not be reflected in the
rental map index which has been used in this chapter. It
would be interesting to attempt to set us a "natural" area
index through the use of a social register or occupational
register, but the time factor prohibits this. In addition
to the rental map (see map no. 1) an historical map of
Lansing,which may be of some use in studying the dynamics
of Lansing's ecological structure,has been constructed.

Before attempting an analysis of the Lansing
situation, it is imperative that one get a notion of some
of the conceptual frameworks through which urban ecology
can be viewed. A summary of some of the more widely recog-
nized theories follows. Before going directly into the

theories, it may be helpful to set up a taxonomy into

Ma? II" MOP Show'mg “59- Average. Movmflj Rent
5.: each Hock 'm in C33 cf Lansing. Michigan.”

as a? “VI-O.

H I 115;?“ _ I '

E .

 

 

 

 

 

 

 

lllll
'

 

 

si-
D[

n“
. 1.,
l.-

'{,1/"

l 0 V.

I I
z-Julyn
D I I

‘V\~\\‘ \‘ ‘.:v
\ ' ‘ . .
.\‘\ ‘. ‘ . \
‘.\ \IA‘ ~
.... "l\\\\“\‘\
> ‘ ‘|\-\ \ .§\ |‘ ‘l ‘\\\‘\‘;§\
\ . '
‘z ‘ ‘h‘ ‘\‘\.‘\_ ‘|‘\ ‘. \\

NEE?
G’-

. - , 'l
r/‘I.""/‘
" ’-'/h'..' 1'

I, O'/"'
'1 I

 

Sou'ctg Data. obtained Siam (LSB-eeawof' Census.
Bgus'mg. Mic Lu. Fig. ¢ Setthoufing

Bu‘kfin- €07 Lansing.m‘ck\gam,-B‘ock Stfit'sh'cfil H40-

 

 

-13-

which these theories may be fitted. Walter Firey has made

a very meaningful classification.1 He separates the the-
ories into two main categories, those which are descriptive
and usually depict their generalizations in an idealized
form on a map, and those which are rationalistic and attempt
to explain the underlying mechanism which will determine

the growth and structure of the city.

Except for Firey's attempt to consider cultural
factors and to integrate them with the economic variables
into a rationalistic system,which might be termed "the
principle of the prOportionality of ends," all of the
rationalistic systems are pitched in terms of economic
determinism.

Any community has various ends which it desires;
these ends may be economic, cultural, et esters, and they
vary in intensity. Firey, it seems, would attempt to mea-
sure the utility of these various ends (not in terms of
money, though probably necessarily in some quantitative
terms) and to balance the marginal utilities of the vari-
ous ends. At any rate, these rationalistic theories need
not concern us here, because we are interested for our pur-
poses in the idealized descriptive theories.

The first of these descriptive theories in point

. 2 a
of time was the Burgess Concentric Circle Theory. Burgess

 

1 Walter Firey, Land Use in Central Boston (Cambridge,
Mass., 1947),jp.6.

 

 

 

2 Ernest W. Burgess, "The Growth of the City," Readings in
General Sociology, edited by Robert W. O‘Brien (PalQKlto,
California, 13477, pp. 268-270.

-14...

states that cities in the process of expanding separate
themselves into a certain spatial pattern based on econo—
mic and cultural groupings and that this pattern is typical
of all cities with only "interesting minor modifications."
This natural pattern takes the form of concentric zones as
pictured in the diagram below. The first concentric zone

is the central business
district; the zone encirc—
ling the business area is
the zone of transition or
deterioration and is charac-
terized by poverty, degrada-
tion, disease, crime and
vice. The third zone is made

up of workingmen's homes, fa-

 

milies who are poor but thrif-

ty, honest, and skilled.

Following the workingmen's zone is the residential circle,

and finally, around the periphery of the city, we find the

highest grade residential area where the elite congregate.
Another major descriptive theory is the Hoyt Sector

Theory. The basic postulates of this theory were given in

an article entitled, "The Structure and Growth of Residential

5

Neighborhoods in American Cities." His idea is that the

 

5 Homer Hoyt, The Structure and Growth of Residential Neigh-

-__._

borhoods in American Citieg, (Washington, If 0., 19597, pp.

 

 

-15..

"natural" areas of a city tend to take the shape of sec—
tors originating at the center of the city and expanding
outward toward the periphery in a fan-shaped manner. This
is especially true of the high grade residential neighbor-
~ hoods. They are prevented from moving sideways because
this area has already been occupied by an intermediate
rental sector. The area beyond them is usually available
because land promoters anticipate the trend of growth and
have restricted it to high grade use. This is not by any
means a complete statement of Hoyt's theory, but as many of
the details of his scheme will be brought up in the analysis
of Lansing, it will not be elaborated further here.

The third and final theory which we shall consider
is the Firey Cultural Theory.4 Descriptively, Firey's scheme
is not a complete theory in itself but rather a refinement
of the above two theories. Instead of refuting Hoyt's Sec-
tor Theory (if you grant a broad interpretation of a sector),
Firey's work adds cultural causes to the economic causes as
an explanation of the development of sectors. Nor does
Firey refute Hoyt's theory that high rent areas tend to move
out in their sector to the periphery of the city in every
case. Hoyt's idea was undoubtedly postulated on the prin-
ciple of filtering within the sector, and Firey merely
showed that there are certain cultural and institutional

impediments to the filtering process.

 

4. Firey, 139—30-38-

-16-

In attempting to study the ecological structure
of Lansing, it is necessary to separate our analysis into
two separate parts, the dynamic and the static. For the
study of the dynamics of the city‘s structure, two sources
of information will be used: (1) an 'historical' map (see
attached map no. 2) which shows the blocks which in 1940
had a plurality of structures built within a certain Span
of years, and (2) the early history of Lansing. The infor—
mation used from these two sources will be oriented toward
discovering the validity of the various descriptive theories
summarized above.

The 'historical' map gives a rough indication of
the way in which Lansing develOped. It would seem to indi-
cate that the early growth was approximately in a concentric
pattern, but with the concentric circles being somewhat
flattened or eliptical in nature due to the flow of the
Grand River, and with the top (western) part having a lar—
ger radius than the lower half of the centermost elipse.
Thus this map lends support to the Von Thunen theory of land
use develOped in Germany in the lECO's.5 That it conforms
to this theory is due largely to Lansing's tOpography, it
beinggractically a level plain, with no natural barriers to
development except the Grand and Cedar Rivers. These rivers

did modify the pattern slightly. Of course, this structure

 

5 Richard T. Ely and George S. Wehrwein, land Economics
(dew York, 1940), p. 68.

 

Mavn.‘- Ma? Shoufing “‘05: Anus 4‘ Lani"! ,Mifibi an.
whack kid It NIM‘ 4 Heme: Within. Ceiacn. %
Specs-fin! Tim 3&5, as a} flag},

 

. o—u- ~ -- 1 Mil H mumafié 35“:
J . l idea Er“; r?“ if”?
. 5 . s 5.5 2--

 

 

 

 

 

 

 

 

 

 

 

 

C[—_;"l
b c1633
fig:
k.“
2:1 {3'

 

"I
5—.
35:)
{f
u

 

 

 

 

 

0L 1:
.' no a I! “:39
I . Bar». H00 ...-. 5: ””.5!
IlflOO-\\\Q w. 7:?!5 E 4;?‘1
' Hu-Hlfi x urn 5:3- 3'
“‘30- '1“ / 2:35. i A r'
M.? no. 7.

swung: Data Obtain“ 4"!» “n “.3. Bureau, .Q census.
“m Seek-mat} fie. Fem sax... w...s-..g_‘3..“m:
i»- MACE..." Linimg Buck Shut-.5“, n43.

 

does not add support to the Burgess Concentric Circle
Theory, because the point of his theory was not to eXplain
historical development but rather to explain the "natural"
socio-economic areas of the city by the concentric scheme.
One could come to Burgess' concepfialism theoretically,
however, by combining another concept with the Von Thunen
analysis. This other concept is often called the "filter—
ing " process. The general idea is that it is the more
wealthy that build the new homes, and the houses which they
vacate filter down to the next income group. The houses
.given up by the middle income group are taken over by the
low income group. The houses which the low income group
vacates either ripen into business usage or become a blight—
ed or transitional area. Thus if the Von Thunen analysis
is valid, and if the filtering process holds, by combining
the two mechanisms, one emerges with the Burgess Theory.
However, this analysis neglects the fact that in any con-
centric circle (for example, that one represented by houses
built before 1900) the houses, ‘aving been built in differ-
ent styles and qualities, tend to depreciate and become
obsolete at different time rates and hence do not filter

to a lower class at the same time. It also neglects Firey's
contention that cultural values may prevent the filtering
process from Operating in various areas. As a result of
these omissions and inadequacies, the Concentric Circle
Theory breaks down as a satisfactory eXplanation of socio—

economic groupings.

Let us now consider the written history of Lan—

sin: with a view to anal zine the Sector, Cultural, and
x.)

Q
Concentric theories. Lensing's development was peculiar

in that the impetus for its oriyin was political rather

than economic. Before the state legislature decided upon
this as the site for the Capitol of Xich :an, the area was

practically all swamp and wilderness. "The State Census

of 1845 gives the white pepulotion of Lansing Township as
88 souls, ano the entire 56 square miles was practically
an unbroLen wilderness covered with virgin timber. The

only settlement was a group of log cabins around a small
saw mill at the east end of the dam at what is new North
Lansing."6 Then the Capitol was built in 1847, the locus

of the town was shifted from North Lansing to its present

f."

center. rne business district, however, was not at first
concentrated at its present location. Because of the place-
ment of the main roads leading into the area, it was thought
that the business district would develop along what was then
and still is Main Street. J. P. Edmonds says, "They appar—
ently intended that the residential section should be in

the central part of town around the Capitol square.“7

H

usines

(.0

"This, however, was not to be. places
commenced to spring up around the Capitol square and in a

very few years Main Street was practically deserted for

 

 

-20-

(D

business purposes." The locstion selected for the Cepitol

was instrumental in causing Lansiné to be divided into

separate sections during these early years. The trenspor-

C'f
1»

ution lines end briiges were so placed thst a community
end business area developed along Main and South Cesar
Streets in order to be in the direct line of traffic coming
to the Cspitol from the other important towns and cities of
the éay. A second section grew up around the Cepitol it-

elf, and the third was the original settlement in North

(I)

Lansing. It thus so happened that for some time there were
three separate and sistinct sections of the town—~Loner Town,
Riddle Town, and Upper Town. The names given to these areas
eppsrently described fairly eccurstely the socio-cconomic
status of their resioents, although it is difficult to dis—
tinguish any greet difference in status between the Riddle
(around the Capitol) and Upper (Kain Street) Towns.

In respect to hotels, it is interesting to note
that the first one wes located in North Lansing, but was not
successful; the second hotel to be built was also stsrtefl
in 1847 "on the northwest corner of Rein Street and Eeshing-
ton Avenue where the residence of R. E. Olds now stands...
For nearly twenty years it was the best hotel in Le sing end
from its opening became political headquarters end the center
of sociel activity."9

A few other quotations give us en ineicstion of the

 

8 Ibi€.. p. 21.

 

locations of the socially elite. "Probably no man in the
early life of the city has left a more vivid memory than

’1

ans Ior his time,

u!

be (Ir. Hosmer). POSSESSEi of an; e m

he was generous to a fault and charitable to the extreme.

His residence vas on East St. Joseph Street, corner of

Grand. The grounds covered the greater part of the entire

block and were landscap d and cesutified more than any other
"10 .

in town. Hr. Buck was another important man in business

and politics. ”His reside

:3
(3
(D
.4
"7
CD

on the corner of Capitol
Avenue and Icnia Street where the Telephone Building now

A

stanxs. The much family were all very much socially in—

1

clined and exceedingly hospitable. Their house was always

ll

Open and headquarters for every social event..."
”It is, however, somewhat remarkable that on

North Washington Avenue there are still standing, in the

same neighborhood, three of the original mansions erected

at that time, each of which is intimately connected with

early business, social, and political life of our city. At

878 North Hashington Avenue, there still stands in fine con-

dition, an old-fashioned square brick house which was built

"12

about the year 1857 by Daniel L. Case.

"A block or so north at 1025 there 1

C0
U)
(‘1'
r7
:3
{)1
F10
S
U(
‘33

 

(3'
g...»
L
O
'0'
O
t?
H

F.’
'._J
#4 14
0’
P
Q: N
*0
O
cn
Q!

 

H
{\3
3-4
C)J
H
C):
'x)
H
(F!
O:

 

frame building which we now know as the Colonial Apartments.
The original of this building was once one of the finest
and most impressive private residences in Lansing. The
third house was across the street from the Pec

(above), and it was occupied by Dewitt Clinton Leach, who

was one of the first editors of the old Lansin; neoublican,

. "15

A

now the btate Journal
These excerpts give us an indication of where the
hiéh grade residential areas were at the be;inning. There
would seem to have been at least two separate districts,
one south of the Capitol and present business district
along Main, Cedar, flashinfiton, and Capitol Avenues and the
other north of the Capitol along Tonia, Ottawa, and North

.1

Tastington. Both districts seem to have strung out

03

long
the main arteries of transportation leading to the Capitol
and business district. This tends to support Hoyt's obser—
vation that the "first type of high rent development was the

axial type with the hi_h grade homes in a long avenue or

‘~1
~_l
!

avenues leading directly to the business centers."

"The total area of the original town was about two
square miles, but as time went on and the population in-
creased, many subdivisions were made and adjacent lends

15

platted until the area increased to 7% miles in 1933."

In 1872 plats were filed which extended the city on the west

 

15 Ibid., 0. 157.

 

14 Ibid., D. 158.

 

15 Edmonds,pp. 38, $9.

to Logan Street, from Michigan Avenue south to Vain, east

to approximately Pennsylvania Avenue and including the areas
both south to Iain and north to Grand River Avenue. Between
1872 and 1930 the movement of the elite seemed to be pre—
dominantly westward cn Main Street (Barnes mansion erected
1878). Two pioneers of Upper Town built large estates in

Y

the one hundred block of Jest Rain in 1390 and in the area
two, three, and four blocks north and west of Iichigan Ave—
nue. Interestingly enough, the develOpment of East and nest
iain Street on the high bank of the river agrees with one
of Hoyt's placements of the high rent district in a city
located on a level plain. However, the high rent area has
not spearheaded out from this point of origin as Hoyt's
theory claims. The area extending from one hundred to three
hundred Vest Main and north to Kalamazoo has not filtered
down to the lower rent groups and to commercial use. In-
stead, it has resisted deterioration strongly, perhaps for
reasons of sentiment and symbolism and because,traditionally,
leading citizens have lived here, all reasons similar to
those Firey found for the tenacity of Beacon Hill. Consis—
tently, from earliest days to the present, theumstern half
of the city has been considered the more desirable, whereas,
except for isolated cases, the eastern and northern sections
have always been lower rent districts.

In 1901 the relocation of R. a. bid; automobile

factory in Lansing inaugurated the period of rapid industrial

-24-

growth. In housing development, this accelerated the fil—

tering down of the area directly surrounding the plant and

extending west and north al scent streets.

In general, our 'historical' study of Lansing tends to sub—

stantiate Hoyt's theories of residential develogment, but

with some additions from Firey. However, it is difficult

to find any substantiation for the Burgess Concentric Theory.
In order to study the present ecological struc-

ture of Lansing, we have used the 1940 Housing Census,

Block Statistics of Lansing16 to construct a map showing

qu1,.\2.

the average rental values for each block.A Three div sions

were made: £0 - $50 per month average rent ereéé; :31 —

$50 Egreené; $51 - Eblueé. As Hoyt suggests, patterns early
established have continued in the same direction to the pre—
sent. The west side has remained the more desirable area
with the highest rental areas closely following his ideas.
Hoyt also postulates that the tOp residential districts usu-
ally grow "toward the section of the city which has free Open
country b yond the edges and away from the dead end sections

. , . , 17
wnicn are limited by natural barriers to eXpansion."

 

16 United States Bureau of the Census, Housing, Supplement
to the First Series, Housing Bulletin for Eichisan, lanaing,
Block Statistics (Washington, D. C., 1942), pp. 6-16.

 

 

 

 

17 Homer Hoyt, "The Pattern of Movement of Residential
Rental Neighborhoods", Readinxs in General Sociology, edited
by Robert W. O'Brien (Paloalto, California, 1947), p. 517.

 

hoore's River Drive and that section in the center west
extendin; to the city limits conform quite exactly to this

v

pattern. The only other high rent areagfil) the small Jest
Main - South Capitol T which is now beginning to succumb to
commercialization and (2) isolated blocks north and west of
the Capitol which have maintained their prestige due to
sentiment and the force of certain personalities such as
Richard Scott.

The northern part of the city also has continued
in its early pattern as the lower rent area, and with deter—
ioration it has become an almost entirely low rent district.
In the eastern half of Lansing whereinxery few better homes
were built before 1900, settlement was not extensive due to
swampy, low terrain and periodic flooding of the rivers.
After 1900 the large influx of auto workers were forced to
build in the east and southeast, due to limited space on
the west side. South Lansing, with the exception of South
Washington Avenue below Main Street, which is a commercial
and transitional area,'and South Cedar and Larch Streets
near the Cedar River which have long been old, blighted sec-
tions, has developed for the middle rent group. This is
partly because the southwestern section is adjacent to the
Moore's River area anl hence was naturally attractive to the

middle group and partly because real estate promoters made

the Devonshire, Sunnyside and other subdivisions desirable.

-95-

do discussion of the ecolo;ical structure of Lan-
sing is complete without mention of the important role

1 -1

la'ed oy LESt Lensins as the bedroom for large numbers of

'0
A

)

ansin '5 upper and middle upper groups. Thi

‘4

U)

er lains why

[—4

'(

Lansing preper has a smaller really high grade residential
area than one would expect of a city of its size and income.

An ecological analysis of Lansing through three

(1)
cf
tn

5es has now been completed:
(1) A static analysis of Lansing at the beginning of its
develOpment.
(2) A dynamic analysis showing some of the patterns of
development and factors which caused these particular pat-
terns.
(Z) A 1940 rental map study to obtain a picture of the
present structure of Lansing.

This analysis is incomplete both in its historical
aspects and in the number of indices that have been used
in determining socio-economic status. Nevertheless, it is
the object of this chapter to determine some of the nature
areas of the city, oni hopefully the rationale has been de-
veloped sufficiently that thissmep can be taken with some
justification. Before actually outlining the natural areas,
it miiht be well to mention some of the precautions that

should be recognized. These ,recautions were taken from an

article by Calvin F. Schmid:18

 

U)

18 Calvin F. Schmid, "Concept of Natural Areas, Census Tract ,
and MetrOpolitan Districts," Readin sip General Sociology,
01

edited by Robert N. O‘Brien (Palofilto, Ce ifornia, 19477,pn €61.

 

N

l. The concept of natural areas should
not be applied too rigidly. For example, it
would be extremely difficult, if not impos—
sible, to delineate natural areas for the
entire city that would serve as a common
denominator for all social data. In actual
practice it day even be necessary sometimes
to make some unit more or less arbitrarily
serve as a basis for compiling data and mak—
ing analyses.

2. The criteria that are chosen to dif-
ferentiate natural areas may not be univer—
sally applicable. As a general rule it is most
satisfactory to select a combination of factors
to delineate natural areas... The criteria
that are chosen will be largely determined by
the problem at hand and by the point of view
of the investiga or.

5. Natural areas ar not sharply demar—
cated from one another. The boundaries are
usually indefinite, being zones rather than
lines. It is entirely permissible to draw
ooundaries, but their arbitrary nature should
be recognized.

a. Natural areas are not static and
fixed but are dynamic and ever changing. The
various interrelated factors which differen-
tiate one natural area from another are sub-
Ject to alteration in the course of time.
Recognizing that the data are somewhat inadequate
and the boundaries arbitrary, Lansing, for the purpose of

this study, an be divided into five natural areas for which

separate indices of real estate prices should be constructed.

f

These areas are: (l) the West Side or high re b area, (2)
the Middle Rent Area, which includes most of South Lansing
and Lansing east of Pennsylvania Avenue, (5) the Negro Area,

(4) North Lansing, the predominately low rent area, (5) the

m
a.

*3

ansitional Area, and (6) East Lansing.

M3? m:- Na? Showing 1"". Division. of Lans§n3.“\ichi an
{6‘0 {his Ola-turd “ans, {0? each a? Ninth. Sg"fat‘}

\
{sun Vite Inn“. 5.“ 5.“ ComtrudeA. a

J

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-29-

The assumption is that within these areas influences are
such that the course of real estate prices might be much
different between areas, and thst an index for just the
whole of Lansing would cover up some of these internsl de—
viations which might be significsnt for analytical purposes.

See Map No. 5 for an outline and exolanstion of thes areas.

‘

CHAPTER III

5-:

EB LETEOD USED TC CCYSTPUCT IYDICZS

The same method was used in constructing all of the
indices. As mentioned in the introduction, the methodology
is not or rig ina l but was adOpted without change from a doc-
toral dissertation by Herman” "I nga rden, entitled, $3 Index
o_;"_ cal Real Estate Prices (Ann Arbor, 1927). The West Side
(high rent area) Index will be used to expldn and exemplify
the method.

The first step is to gather the data. Ideally,
the data should have been entirely sales prices, but since
such data were insufficient, it was necessary to supplement
with listing price information.1 The data were obtained from
The Lansing Board of Realtors, which is a federation of thir-
ty-tvo realty firms, and from the Advance Ree.lty Company.

The data were so filed as to make it possible to
translate the listings directly to a working table, that is,
each address had a complete history of all listings filed
together on separate cards. If one looked, for exampka, at
"A" Street in the files and found M12 "A" t., one would find
three cards filed, one for 19MB, one for 19u7, and one for
1949. A fragmentary sample of the working table used is given

in Tab lb I.

 

1 See Introduction (omapter I) pages 7 and 8, for a discus-
sion as to the accuracy and comparability of the data and the
adequaCJ and representiveness of the sample.

emewm H.-- p ewemmmma ow emm nommmmm.e>mem mmonqae emowmmaHmm_:eoa am am Ham emma
mHem Aqum the emmwv Haem arm mamas. eHmeHee emHoam emm mzemmme ceemw
amm_peemoemeHm_mmemm pee mmwpeHAMm ooueaeme meow same

 

 

memmma ewes Harm Hmew Page Harm perm Hmpu Hmem ewes Hmmo
AHOOV Awum newmv
new a ma. H:.ooo mm.ooo mm.ooo
sow » ma. _ Apoov Apomv AHNQV
Ho.ooo Hm.moo Hu.ooo

Awoov Ammv

wam m.ma. :o.ooo w~.moo
Hmmm m ma. Apoov AHNNV AHNHV “Hmov
mwmo Hm.moo Hm.ooo Hr.ooo
Hmww m ma. Aooov AHWVV Apmov
umoo Hp.umo Hm.ooo
Mach w ma. Hoov Ammv
Hm.moo Hw.mmo
Hmwp m ma. AHoov “pony “whoa
mhmo memo Hm.ooo
Hem a ma. Awoov Awmov
«moo mooo
wmo ma. Awoov Ayamv
mooo mooo
mpm ma. 308 :03
wwmo M“moo

The addresses are put in the stub and the dates in the heed-
ings. The prices at which a property has been listed are
then entered in the proper row and column. The illustration

. 1 .. .
snows listinrs for Years 19dl to l9fO, but in actuality, the

l

(.1

rn
cf

udy was carried been to 1935. The method precludes the

53'
U)
(D
O
H:
d"
L37
0
U)
(D
’d
[.b
’D
O
’D
U)
0
H:
"3
(D
o
H
(D
'“Q
cf
’33
c+
(D
3..
tab
0
3‘
5‘
'u
<:
(D
0"
(D
m
3
H
F“
.- n
d"
rp
I):

only once. Houses must have been listed at least twice and

.3
9.)
k:
:3‘
CD
<
(D
U,
(T)
(7)
B
}_J
H‘
0')
Cf
(D
:34
1

many times. For exanple, 152? "B"
Street was listed in 193$, l9“6, 19*7, and 19*9.
After this type of working table had been corpleted
for the whole of particular area, the listing prices were
converted into percentages in order to show what per cent
he price was of the base year, the base year in each case
being the year in which the property was first listed. For
example, (see Table I) M12 "A" Street was listed in lQU? at
$14,0oo, and in iel7 and lets at $25,000. In order to com-
pute their relationships on a percentage basis, 19“? was
taken as the base (ICC) and the price for 19”? and for l9U0
are divided by the price in l9h2, eivins in each case a fi-

gure of 179. This shove the percentade of change occurring

during this interval in the value of a piece of property.

.3

D

:18 relatives -re found in Table I in parenthesis.

C

The next step is to sort and put in separa e tarles
those relatives (percertages) with the same base year. In
Table I, 1522, 1613, and 118 "B" Street would all go into

q” ' ’-> 728 lghh‘ Tahle II shows the

(‘1‘
I'S"
m
d
C!”
01
U‘
[—1
(D
'1...
O
0
L0
0
Q)
U)
(D
”D
(«1
'1

(‘3

- 100

EASE'YEAR

amdpm HH.

'0» figs”; «flu-J

4413

1‘... ..P

0.3.43
For-tr. r

«Emma
D]
(P

emip

F.

 

H
\ '3
‘.)J
\‘1

(J‘\

Home Home

Hone

\.\\.

Hweo Here

mee

was: Harm

 

[—1

;-J
0 0’9. 0 \ O C) (a CO C

H

’1
“w
\

“JFOKOl-NIIO\FJC_

poo
poo
Hos
Hem

H 0 Cd Ce O\\O\O'\l

N (3 —\1 (fl 43314 i

FHJ

’VKJI

J

H
Ce. 0 \9
Jun 0

00.0.

HHHH
In 0 re F0 is. 5:
J] .0 C) ‘4

In
urq=

 

Hmwum H00

.5....C1. «dc-10

.l’\ IIIL..r '

eHum-
mmwe- poo
aH

\ C)
[‘4

C31

(,1
(h

'CGL

2

C71

\

\.)J

\CC)
{-3

\.)J

How

'—J
F.)
C)‘\

> nu.1144 P..y«

t'rlb .

‘\C)
O

\.31

am H

JH O\
~\l
}.J
Us.
-\J

F\) ;\
.:_. 'V

-"\J ._)

K

E)

{\J

{\J
(3‘\

—7?L-—

relatives of those listings whose base year fell in 19.5.

The same procedure was followed in each of the years from

1935 to 1939 inclusive.

I

\

each of these tables was then converted into a
separate index Which means fifteen separate in - exes, one for
each c:3e year. Table II shows that there were fifteen list-

“, . vf‘ """" r.~v
ings in 1930 vhose base year has l9;3. An average of those

fifteen relatives should be a rather reliable estinate of

(D
Cl"
*Jo

i..J

the relative change in the price of resid n a real estate
from 1935 to 1935. Lih evise, an average of the ei:ht list-
ings in 1937 should shot;the relative change in price from
1935 to 1937. The arithmetic mean was the type of average
used.2 The computation of the mean for each column in Table
II produces a separate index which shows the relationship
between the va us of real estate in any particular subseouent
y ear with the year 193 5. Corresponding indices were construc-
ted for each of the years between 1935 and l9h0.

Two other operations were performed in Table II.
The row entitled "number" shows the number of relatives on
which the average was based and will be used as weights in
the final index. The other operation is to compute link-
relatives of these averages. Link—relatives show relation-
0

ships between any year and the year preceding. They reveal

Year to year changes and are computed by dividing the mean

 

2 This is the only deviation from the method used by. 'r .
uvn'aroen he used the median.

J

HHHHHHHHHHHHHHH
\D \O \O \O \O \D \O \O \O \O \O \ D \O \D \ O
4: 4: «F: 4: 1: Jr 4: 4‘: g: g \N \A \rJ \r} \371
\O (19 'xl U\ U] \N l0 H \0 U1 \1 ‘A K»!
A
H H
OK)!
\NV
O’x-DL) 09.
“\IV \V
A A A
\O O\\ O ?—-’ C9. C0.
13%).! O O\V
V
A A AHK‘
\OU1\O<'D\‘O -fz'H .7:
\J‘IVCQ‘VI‘OVOV
A A AI—JA A
\O—Q\O ca cakn O H 011 Ca
\Nx/RJHflor’Fff-dr’
V
HAHA AHAHA A
0w O~\1\O\I‘l O {:C) .‘JKO‘V'J
MM)IW1VHW1VKOV
HA ‘JAH AHAf-JAILLJA
(D \O O‘xJJ C) {\J 1-4 :‘H -1'1"'\.)\~l
{0V -P—x/HVCQVNQRNV
H'fl 'Jkkl [J 41701—014 #4 H H "‘\1 F931
C)V(,§W1VfOVO‘JCDVI‘J\/iu \J
(D 3-4 F4 O\-‘-’ 1‘.) C1 I-J (3‘5! '3‘). :1) l" H i\) IT}“’ ON
C1 H m v mvxr.) v .gvm v Hvb v o\~J
V
H H H H {"J and 11) um 3—! a) —4 70 m‘ A C) in
\O\)J\J\| O O HIM-J VI‘QV()\\J\n v-;:‘-’\»J v
v V
\N (21:0 ?4 {O iJ‘uJN 3 10k)! {0 .J 10 .O‘J] (’1‘1‘51\O\_;J Q09"!
—\1 v e). H -.f:H to vxo VHJ v -:’V H V H VH0 V 0““
V v
Hm a) C"l\.O H O ()\‘\..C)-\J Hm] :1) “.11 ca Hm: to w irrrmtu
\N \JKD V\_O :'\J\N \IK‘V‘J vino V av.“ V‘.O V “a"! {:V
v
OU1 O m‘o 4:H\.u $4 r)\H H F.) HMO IO (:1 H 0M») 0 tuxo m
NV,{;-VH\/\}1V}.Jv_fyv‘ovmv {‘~QV?'J\JC‘1V\‘JV
\oxnca-4\o+4<j<rso\0\o :aqruxo+4 u9a301n3\0+4 30+4
\JV'NIW [‘0 _‘v:v0'\v\~VU§\./\Qv N~JNJVQV 10V
V
HAHA}—JAHAI—JA A HA HAHAHr—x A A
HHO pox») 4:11) mer: HH OHKNH OHoaHmH
\ VHV(DVO\VHVg§V (fiv fi_V':)V01\/4:V\OV

 

l—J
\ C)

h/
72.

61

1 12

r‘/’ x’
{14.0

I OHCI 6£61

,
O

I

21(61 ant/>1 T.“.'

/
.(oI

OT. '1‘"

If
V'.‘,'
.Jo‘

91g6T.

CI

I Li‘

Chi-'1:
{Nib

1161;

cést 6

 

1'1 33

P‘:
\~

"‘.T?:" ""20 Clip-77'
UL-oIo luau.” wyl“...ulu

'1

I

v:
vb.—

' Th
L-U
172083

L—

Q- - ”-
JlL‘LLrI

CES V21 8 I EAIL’CIIELI

"ITTT\T':"-‘L‘v ‘."T‘
“11mm CvaL La“.
{‘1’
u.

'SIS

P’v
)-

"VI”I - 'III 913193.]

<7 7'
1.0.

(1—1

«7

“IE

EAIL \

no:

O 9~ y
1“—

I’.' I
Cam

7 N c '“ r- ',."r 5.9-!-
1 I... H;H.L\L¢ -.'_

IT
Lad-LU

‘ V
\

‘9'“ fly.
. u ...
WH‘O¢~*‘

 

amepm H<.-- mammo cmoa amm eHaa-mmuaoH<mW ago amHomem Ha gamea HHH. Ho mmoem amm mag as
an“ amHomom. amm ooweaano amHomou ”amen“. Ham quomamo nmwam on» emu. pee saw
”meme aonmmmm ooaemwzmo owom a Howm mama go » Hmwm-oowo mamm.
III \ \
wmco Home Pawn Howa Heme pogo HoeH Hmem Heed Hope poem Hope Hope Hora Hope Hmmo

 

umHemem Hm He m: Hm mm m: mm mo wm so mm mm we mm mu
amHomeno
nmwzm you How you my mm o: now How Hen me we: was pwo How ma Hom

H amupoo woo How Hwo woo

RID

a so mw woo Hwa H

ks]
J\
. .1
\ H
U1
H
\O
{0
{\J
F4
1...:
R)
“J
O\

mmw mu:
memm

onwammo
go H am-
Hmwonwoo on How you

\O
U).

\0
0\

mo mH om

}4
H
KI!
}.J
\ >4
J
1.:
fl
{\3
H
1,3.
wL

PO
(‘0
H

cow 3%

m
[‘0
\O

for any yea r by that for the prece eecing ye: r.

The final step is to combine the fifteen seoarate
indices into one in<dex. This is done in the following manner:
First, the link—relatives for each index are transcribed to a

able (see Table III . Next, the number of listings upon
viich each link-relative is based is put in paren hesis above
the lin z-reletive to thich it refers. To form the final in-
dex these link-relatives, which are themselves averaqes of
several relatives, are aver ed by the use of the weighted
arithmetic mean. The figures indicating the number of list-
ings upon which each link-relative is based is used as a weight.
The resulting weighted mean (see Table IV) is still in link-
relative form and shows the relationship of averag prices
in any one year to the average prices of the preceding year.
This type of comparison has some usefulness; however, it is-
customary rdn ee

err if one were going to compare indices

I4

(I)
U)

over a oe rio do f time to express them in relation to some base

.L

year. This proc es s is accomplished by "chaining",3 a system
of successive mult “1 ion accomplished in the followin.3
manner: Let 1935 be the base year (100); multiply th is times
the link-relative of the immediately following year (1936)
whose value is 103; multiply the product (103) by the link-

relative of the he} :t following year (19 37) finich is 107.

 

 

3 See Applied General Statistics by F. E. Crogton and D. J.
Cowden, (New York, 1939),p . 615-321, for a discussion of the

chain ind x.

This product which is 110 is multiplied by the link-relative
for 1938. This process is continued in a similar manner
completely throu3h 1930. The resulting series of index num-
bers shows the relationship of any year with 1935 (see Table
IV, row entitled "chained" 19332100). Because these indices
will be compared later with indices of construction costs,
cost of living, et cetera, many of whose base is an average

of 1933-39, it is best that these real estate price indices

at this time be expressed in similar terms. 01% nging th

h
base of an index can be accomplished by the f0110Ain3 meansz'
First, determine the 1933-39 average of the chained (1933:

100) index thus 100 103110 100 98 — _102. Second, divide each
9 ,
the chained (19352100) index numbers by the resulti-3 value

it

o
(102). The resulting final combined index for the West Side

(high rent area) is shown below:

1935 - 100 19Mo - 9o 19u5 - 152

1936 - 101 19u1 - 91 19u5 - 133

1937 - 103 1942 - 98 1947 - 207

1933 - 93 H9 3 — 115 19nd - 221

1939 - 9619UH-- 133 1949 — 217
1950 - 229 (based on
first quarter only)

 

4 See Practical Business Statistics by F. s. Croxton and
D. J. Cowden, New York, 19'8), p. 326- 327, for a discussion
of the method of chengin3 the base of an index.

 

CHAPTER IV

THE SIX INDICES

The preceding chapter traced the method used in
constructing the High Rent Area Index. Exactly the same
method was used to derive the other five indices. The first
part of this hapter rill present the important data for each
of the six area indices. The first table in each section
shows the fifteen series of preliminary indices of real es-
tate values, vhich are later combined to form the final in-
dex. The second table shows the link-relatives computed from

the data presented in T.

‘i

.ble I and also the number of listings
upon which each link—relative is based. The results of Table
II comprise Table III; the first row (sum of weights) is the
sum of the numbers in parenthesis for each column; the second
row (weighted means) is the weighted arithmetic average of

the link-relatives in each column- the third row is th

“"

(I)

_e
weighted means chained in order to express them in relation
to some base Ear, in this case 1935; and the fourth row gives
the index numbers expressed in terms of a 1932 - 1939 base.
It is this fourth row from Which the data for the graph is
obtained. The final section of the chapter brings together

all of the indices on one graph and makes comparisons and

analyses of meaning and trends.

TEL-3 HIGH ELIQT

A‘LJA I EDI-1X

 

 

emewo w-m.-- ewmamma mmmwmm ow weowomm oe mm_r mmapam <prCMm w: ,mu amma mwom Amwmm
weoo.mv.»mm> amwom pmm ooamwamo so sown gum swear Haema.

wmwm wowm wowu wowm wowo woeo mew worm wmaw woe: worm worm wore woe a woso womo
wowm woo wow woo o: wow mo mo om www mm wmw man mmw mo: wmm
womo woo wow woo mm mm wow wwm www wmo wmm wmw mwm mam woo
woww woo 9: mm mm ma o1 wow wmo w:o wmo woe wmm woo
wmwm woo om an aw mr m was wmm wmm mww wum wm woo
wono woo ow m woo wmm wmh wzm wmw wmo mo mwm
wopo woo won wwm woo wq: wa: mow mwm
woew woo wom wwo wow who wmm mow mww mwo
wmsm woo wwo wm» wan woe wm: mwo we: wmw
worm woo wom wmm wmm wmh woe wmm
wm: woo wwo wmo wm wwm wmm wow
worm woo was wee wwm wrw wrm
worm woo www wwu woo wo
wozu woo won wwr ww
woe woo mu mm
worm woo wwm

-h1_

edem HHIm.II fiHENIWHHPHH<d m GOMWCHMU w
Zdfimmm 0%

1.31.

3C
.zmwom Hp

3mm quamfla

mm b

Add

I'l: UV

HMm OW HQUHQMm

IwMFbHH<M Hm mbmdd HZ

Iv-IrII‘n

 

was was won 3a as was $5 $5 sea

[.4
s)
4:

r—
b

U1
H
\o
4:
o\
H
\o
43

worm wozo wmmo

 

wmwm
wmwm
wmww
wmwm
wowm
wmxo
wmew
worm
worm
woes
worm
worm
wmxw
wmsm
worm
wmmo

mm wwo

va
mm
Amv

wo
A:
wow
o
sz
wow

va
Hom

va

wo
A:

www
“xv
wwa
Amv
wow
Aw

wo

Mme
va
HHH
AHV
HHO
va
HHO
Amv
Hmm
sz
Hmo

Aww
H00

lav
wwo

1—‘1-‘f0 {:14 O\
HVfOVO\V

Amv

mm

HAP-JAM“
O H 1-4 (JV-J {'0
CQFWU\’OVJ

Al—J A
‘xO PO

\N C,“

erkb~
\N 41"{UKN
_‘:"\J_{:’v
AHAHA A

14 mm 0 [\J
031V“) vmvwv

AHA

}JiUV\OV.\IV4:VHVHV

{—p

.1..—
VV

01" N HWN (3 (UK)! R3 NIDFOU1C‘A‘JJKOVO\V
V

-\h401H

AHAHAHAHA A

131 O 01kt) J:1-h,»J H (JV—J I--' O I—Jxo m

F’U‘l Q GIRL) H (3 O\\O"\J HRH FOKJ'I C9. i-J\r~l {0
w V\\O VKO NKJJ w V m v O\V\I V\O V

HAP—3A Ax—Jfi
AHA

H
C)
\l

va

mm

va

ho

va

aw
Amy
wmn

Asa

woo
Arv
wow
va
wwo

Bdem HHHIm.II um MU cwoa amm HHTN HHMHPHHHqu .PHHU 4le («mam Hm...H H‘Pwfifi. HHH.

A. {\44131
a; .w-rUH

OHJ GEM... 1.0.HQHHem. pumm (OHHHuGHJU .r:fl.Ho.HH3mHu Husgu. emu...
PRU Him HHUMHH H.(_HH.1mmmm ODHHAHHHUHHHU Mamba .P Hmwm mmem

_.rl.llq

wo m wowm wowo wpmu.

HH.

mozm 3H1.
MPH/H m oHrP me

m9,“
MU

 

1'

 

woww wowm wmww wmwo wowo wowo wmww worm worw wow: worm wmwm woxw worm wogo wmmo
mag ow
sowmmem wm ww m: wo wo m: mm wo wm ww mo mm ww mm mw
wwwmmamo
rm.am woo wow wow ow om ox wow wow wwo wwm www wow wwo wow om woo
1m: HCEIE. NU
wrftrrw Hm
omPHHHu
mm wO wwu woo woo wow wwo woo mm mm ow woo wwm wwo wmm wom mww mrm mmw ow:
_ mwmm
omwzmmo
eo wow
womouwoo m wow wow om om oo ow mo wwm www wmm woo mow mmw mww mmo

24¢
:86
60
0
too
30

We:
flunk“

‘l-_--

 

6.1m. 38.0.5.0...

Egg-,2

1:13 1:11331421 1 41

A4231"; Il-li‘J‘aX

8&on H.911- WHwemfl4 mHflHmm O4... HH4UHQMm 04.... JUPHL MmaPam <PH44Mm H444 arm HHHUWHM H4523 .Pm UP
1.4....Ham Pm} )O4MmHH4MU 4.4.0 44044.4.” 8mm 4.54.9.4“. H.644?

 

-UQ-

H444 H44m H444 H444 H444 Hmvo HoHH Hozm H444 Hoxx H444 HmHm H4H4 H444 Hose Homo

 

H444 Hoo Ho4 HHo Ho4 om 4o 4m Ho4 Ho4 Hum H4o mmo mm4 mHm mmm
Ho4m Hoo HoH om Hom m: 4H H4m H4o Hm4 Hmm mam mHH H44 mrm
H444 Hoo om mm mm o HHm HH4 Hoo HHH m4m mm: mHm H44
H444 Hoo .4 mo mm mm Hmo Hmo H44 mom Hmm
H444 Hoo m4 Ho4 HmH HHm H.m H44 H44 mmr mom mm4
Hogo Hoo HHH HHH H44: H4o Ham mm4 mom
H44H Hoo Ho4 HHo H44 H4O H4H Hmm .
Hmrm Hoo HHm HHm H44 H44 moo Hmm H44 mH4
HWHN Hoo Ho: H4m Hao Hoo Hmm mHm HHH
Hoo HHo H44 Hmm Hmm H4o m44
HW44 Hoo HmH H44 H44 H44 Hmm
H94 Hoo HHH Hoo Hom Hoo
H444 Hoo Ho: Ho4 Ho4
Hmrm Hoo mo Ho4
HW: Hoo 4H

\0
U1
0

—br_
/

 

HHHHHHHH HHHHHH
\O \O \D \O \Q \0 \O \O \O \O \O \O \O \O \O
rt: 1:" 4-": .1'2‘ 42' {3' -T: .{L‘ J: 1'1" \NI ‘9»! \)J \JJ \21
\O 09. ‘\l 0\ kn -F' \14 [‘0 O \O 09. \l 0\ U1
HA
.3 5-4
\.>~J\O
V
A
HHH
ODJOFQ
+4.!va
A
A 3-4 "1
\o (N. O .--‘ ‘x O -\l
A AHA A
0'.“ -:'1‘\O’\J 13 JZKO ‘1
Olvf—JVQ'AWJV
A
CD. (7V0 O "3 FJ P‘ /)\\O\J
Nv}JvO\/\Qv YEN
H H :\3 m H -gz-Hm \O 010‘ o
}JWVQ\’\.JV\IVNV
HAHAHA Aani—JAIJI‘\1
O :' D o JH‘OUI‘J'J ”'flFJI—J
VJMNMNVk§VOW1v§JV
}—lr\|~1/\ A A AHA
no H \o H ‘-o {‘0' 9 4:04:
n\v\l V 0\v \_-J v Li \J 1...! v
0' .4 0.41 :‘o m r.) H r0 HKE‘I HKO PJ‘-»C)\->J !-J T:
.[;V I...) V }.J V O\\" O\V O v 70 \J {EV'W \/
A
HAIJA'J}—J}_IA A AAAHAHA'J/g
'—’ )\)J 171-40 DI‘WJ\O}-"4O "O JH\3J\‘J‘ “\I' .xl
\OVNVNVNVOVNV 3%,JVOV 0"
HAI4A14A§JAHA'—JAIJAl—JAHAL-lr-xf—JA
’Jr4H~13.4LJ-\JRJEJ LTDJJJS-J Nil-40k I '2] F‘N‘N
f—J\M-‘JV()\VIJ1\4/\)1\.I\,JMIL/1Vf:\./\J‘IV(3\VDV
f" A
H! HHHA'JAI—JA l—Jr" A Ai—Jf‘
l—‘Ksl ‘4 13 F4 (9.1‘0 ."_') R) .[I‘ H —.':‘\O‘\ ~| 1:9." )1 1') ~‘)\
}.J\/_T'_‘:'\./|"O V—QV()\\/ \‘O VN vb“ VQJV
A A
O .‘J‘xO‘O \O [U ’3‘ \l 09. INC-QN PO 50‘ r»! H \O\.-J 0‘»!
[:‘V ")\V\O V (fiv D v :v \ n V\.o V \. fl ~41 \J‘]
A A
A H l-J}—J/-\}—Jr-\f-J/\,l-J/\}—JA HA A A A A
\o 014') Q\O H D {:0 51m :0 ‘0 H m C) on H oar—How r:
mV‘-OV’3\VH‘M\’JSLVO\VFOV wavaV v
\Q\._v~l O HO ,1:'\Q\1\o Hm: n) (JV—Jinx»! 01 (RH A) H

’J

'I {“61 ans: {W6

*1 5

7'7

a

n /— f. -
I ‘j’agOL 33101

\O

 

T
LU

'EII GIQB

01
A

‘u
Lu‘i

HEII

Qvf‘,"!'
LJ.
\filt

r—v‘-

IT .53
IJJVIJLa'

'fl
'_.'.L-.Jb
A
‘4

v-\ T-
J.
""\’\

L .

.WL‘JU Lac—111

Q ‘3‘
£ch

emUHm HHHIS.I

444
444

3.31..

n.-. LL

44 4444 $44 44.4-4 44444444 p..u 444444) 44 4.4 4 44. 44.44 4.4 an”
2444444. 444 on 4444 44m44444 44444. 444 7.4444444 44444 4444444.
44 44 4 44444 no 444444 40: 4 404m 40 > 4444-4444 4444.

\

Ow
W2C

 

Hmwm

4444 4444 44%

(7\

40:3 44 H 44.5 o...w 4:: 4444 44:. 44:4 40:4 44:4

‘4
\O
\11

O

 

)4. .I .42.
act 0
J‘1flj4.\4fl13)
thL. Lu: I U

0.4I1JI 14135

a. [FQHPF lit

4 IJ J 1.,4

Fl.‘J.lm H00
31... ...3

:2L: IMF

«11).01CIJ

v rtvh... O

)«I .. 411“

.(ITWELO ).LI.L¥V

f.)
0
\4

How

HOH

DJ
0
1"
4:

H
(N)

\N

\ 0

O\

pom How

H00

1.“. I" r r a a. 1| 1” «'1 1'

K: \uH mm Hm HN m . $0 .40 gm v.6 vm

44 44 404 444 494 434 444 Hum 444 44 pom

44 44 44 444 444 444 444 400 444 444 440
.J l..\ \

44 44 44 444 449 444 44” 44” 444 44: 444

F0
[0
\D

imam

-47-

"1:139;

Jfiuderg
Numbegs

 

TIL-J LO}? RLTT

7LQA I HDAX

69.3. m HIE .

G0 MO U“...

1 fiwfid Mm

334

err.L

bad qua WNW?

 

L. 3.
}_J
*4
5

KO

3E?

'\)J

p.

\L)
\D

\

O
l
O\

l...l

\D

I
L

.| .-
\_.|

k

H
\O

 

4: {AM w w w w
H U \0 ma] mm

—a N—fi
-4—

.ffj'l‘q

-_ 4:.
01—4 GNU] 41» {J

HHHHHHHHHHHHH
\O\.O \OKOKO KO \D\O\0\O\O \O

\0
4:4:

HHH
mmm
u
065'

IJ
‘K. i) ’\;) 0

ow

" " H
(RX) 1

1—

'0-
l

H

k) 3‘1 C§AQ \Q

o o

USU D‘QJ L) i4

1.!
0‘0 {1&3‘ .2) C11

H
O

H
.r: H
(3\

41,4

L)\ Q _‘
'\l J. :‘o ‘4 v1

HH HmHHH

CH

C) U1

{\J H I'-J
O\H U9.

P0 V9. \0

71"” \J k '1]

\.

I

Q I 0 ‘ud

N

[v
-._
I

HHHHHWHHHHH

O H l-‘\)1--\I.O -’;D\

C) —T"\J~l-\l O 0 01‘4"! 0me

O .L-Ju’) p9. get-D (U m

HHH!—’HHFJFO

(3 PO \ kl

TO [‘9‘

L
I

“’KM
4mg

93d.) \1

HHHHMHHH

Oxowwm—q :‘o .
O (a MN! 01w H u H O

H

34
am

mwm
wwo

3..
PL...

Em
H3.
H3
H3
H8-

H l" |--' H H
O *3 h) l-' F0
U'IU1\OU1 O

0961

6fi6I

 

+4 +4 i4 F’ +4 I4 F’ +4 r4 F’ +4 :4 F1 +4
\O \O \D \O \O \O \0 \O \O \O \D \0 KO \0
p— ;: 4: r z‘ :r +r 4: 65"” v4 \M \y \w
09. N O\ K)! 1': \N [O \O "1 '\l u\ U]
A
FH4
OM)
wv
A
; Hid/x
C) HON
FOMJJV
A A
/~ +4 H
0910wa r:
A
01mm 00 O\‘O-\!
\OV*\]VFOVI-UV
A A
szHJFJA }4 r~
\O R) 3 01-3 ()\\O JZ‘C‘}. ON
0W. JV {:VNV
'JAHA A A}J/\I—’/\
QR) (DW‘ 0 "‘QFO‘) OFOCSL
Q\Wv_r‘-v QVUQVHV
[Jr-s AHA HA
om o )4 H H O of:
row \‘JlVF—‘v \QV
HAI—JAH/‘HA HAHfiH/x,
OK»! OK») 0 1" {‘0 f0 1" 'r" .-:~':' O\JJ
\JJVJ1V{\O\J\~V Q\v _;_ Md] V
HA HAHAH/‘HA'I'JA A
Hm karma) H H m (Av: .0 1‘0 ca‘w
\J1V POMfiWHV-flv ,JV \J\/
H ()\\O ONO] {1‘13 R) (D H H {\J‘QJ TO ('3 47:10 ‘J1'\,~1 "\l
F-V cam), \J‘\O V .)\V (}l\/\\_)1 V1.4 vu‘, V f3 V
1" A
HHHHHAHAHAlJAI—J: HAH’TLJA
.JQI'U\N\JJ\)H-‘IOHHQ FD+—-i-‘ ‘Jl :00 r—‘anJ
HVIOVHWJVNVHV V HVU]V\QV
A
\D‘ud 'O‘u1\..DW ' -1- 0' J1 F“ .JJ ’Q {‘0 :31on H H‘JJ\>J ”j
0-1V\\OVC’1V1J\V.SVHV'JVHVFOV (ax/[JV
ONHuanOmWOAO J\.OH'\I'-Jl\3§-’ \OroHH
\OV}JV\J1V‘OV\OVWJ1VOVOV \jvpgv
\O l\O' '\O\Q\O \O —."-“O|"" \O HNHC) H C9. #4 O\f"~3
4: v—flvmv :VOV \Omvgv [UV Cl"
HAHAHA A A AHA [.er
H\ OUWFUI-J inlH O\!—'O|—-‘ \.~l%—J
mVF'VHV '-—V\JV mvmv row

811'

46: 6n61

_/
O:

 

-°T-II BIQQL

0?
T

sit-
1
*

p-v-u a,

"
.,_
C5451.

*- - 9-—
"‘ "Jim.

. r‘
‘L—o u

"d

.L I)“
. .5.
; .V‘Cfi

h
H

W'" ”'|

7/" "'7 '7
PI EZV‘VLZL h
-rw-r -- 7 '77-“?

‘ —-‘-.‘
._ ..
‘ .‘ngULJ.

(—‘

v.
H \
’.
l

v.
fl” -."~'-F'f‘(
DHLCQD

S

.L'.

SI EILIJJ
H «:4

lJo o

W

by .C
." .I‘
«i

‘v
it

C'IC¥

«1-
-

~.: I
TQV’

J.

1* '."C‘ "'ch
}-L‘.J.L‘J—'-u V
\ r“
3. I 3:1

’LL

f"
,—
5...
v
._.
‘1

'SIS

-~r
A

PT
P.
HA-

adeo HHHufi.u

mwmmo DDDD Dmm vHDDIDDrDaHDDD D.Du DDHDDDD DD
0D :DD DD D.Dm DDD oo:Dcamo DDHDD Dm Dm.:m
Dmm HDUHD Dctjanm onDDmDDmu DmoD D H\uw Do D

HD mDoDmD
DJHDmDmu :mem QDDH

ewmfifl HHIH.
DDWD-DODD mpmm

mm
Urdu»

ma:

 

Hmwm Hmwm HDWD Hmwm Hmwo HmDo HDDH HmDm HDDW HDDD-

o m Dorm DDDD szm Dorm Home

 

ma: 0D
Dm amem

H
\O
H
01
\N
[\3
DJ
CD
\N
CA
{\3
La

Du DD DD

DE 93%
amDDm Hoo How Dom or

\ 0
U1
\O
-\l
H
O
09.

Ho: wwo Hwy

Dm mmemc

rqum

0mm HEHU

“Hmmmuwoov Hoo How pom mm DD 00 DD HOD HmH Hmm

mem

955% Do

Hmwmnwmwon

woo woo How pom mm ww Do DD HOD Dmp wwo

H
C9.
(21

0
F0
\0

”I
I

F?

Ho:

LN!
U1

Dom

Hm

HOD

R3
U1
0\

mmm

PD

tU

 

D 1:32.... ......-.............

9..
Cu /

emdwm Hna.uu

WHwGMME meHMm ow HHUHQMw

Om, mflpfi
AmHom wa OOHmHZHU a0 wowm 6mm fiHZPF HZUHX.

Mmflpam <>WH

«a;
\L.

HZ.Hmm HNPMmHHHoflWH Pmmp

 

 

Hooo Hoom Hooo Hoom Hooo pogo Hoop pogo Hoxo Hos: Ho:o Hoxm yopo pogo pogo Homo
Hoom woo woo om om \m ow oH HHN HHK Hmo Hm moo moo mmo go:
Home Hoo oo oo m+ mm ow Hoo HHN Hm: H o Hop wwo mom Hom
Homo Hoo How oo oo mo oo Hoo wwo Hoo Hmo woo woo woo
Hoom Hoo oo mo oo op wwo Hoo moo poo poo mom
Homo Hoo on Hwy Hzo poo poo mHo mom o:o
Hooo poo woo woo Ham Hoo moo mmm wwo moo moo
Hoop Hoo oo oo woo woo woo moo
Hogm Hoo Hoo wwo Hoo Hrm pom mpm Hoo Ho:
worm Hoo HHH wwo Hoo Hm. om Hum
Ho: woo woo Hoo H:o pro Hoo
Room Hoo Hoo Hoo Ham Hwy Hmm
Howe Hoo HHm HHH HHH Hoo
pogo Hoo om oo mm
worm Hoo om or
pogo Hoo Hom

Hue fiHam 8mm
vbmdzemmmHm.

PLL):

emUHm HHIH.II fiHEfiINMPPHH<Mm OOHwCHMU fim H Hmm wHHaqdd mmeMm mmofld Hm azwlm
Zqfimmw ow fiHmaHZQm Gwoz SmHom Hpom WHZNIwMFPeH<m Hm wbmmm H2

 

poom poom poop poom pooo po:o pozp po:m pogo pop: pogo porm pong pogo poro pomo

 

:3 3 so to CB how E m pmv 3 Go omo E do «3
poom poo om pom ow om o pmo mp p.p ppp ppp pmm om om pm
Apov “poo Amp Apov pow pow A+V Asp Apo “mo pr pmv Amv npv
poom ow poo ma pom poo ppa poo pas poo pp} pmn on pop mo
poo “mo Ago poo Apv Apo Amv pow Apv Amy Amv ppv
poop pop om oo oo poo om oo pm. ppo pm ppo mp
poo Apov Amv “so Am poo poo poo Am Apv Amv
poom oo or pop pop pm ppo pmm on oo o poo
to he 3 E E Q E Amy
pooo om pm pmm pop ppm ppm pom p:
po: Woo Aw wwo pww Mp va AWV pr WWW
-o om (m o oo \o o
pow poo poo Awo poo Apv
poxp om om pp pro pmo pow
Apov Apo poo poo Amv Apv no Apo
popm poo poo pmm pom pmm ppm mm o
poo “mo poo ppu Amo pr
pogo ppp po pm: pow ppm o.
3% so 3. E E
poi poo pm poo om m4
Apo poo Am Apov on
porm poo pop pm: m o
poo poo Apv Am
pozm ppm op poo oo
poo Appo ppv
popp om pow mo
3 Q
po:m om pom
Apv
po:o pom

Hmmo

J

2mcpm ppp-2.u- 22222 22o2 222 222-,22232229 222 2222222 22 22 22222 pH 2. p2 mm 22 222 222
o2 222 2 22222. oo 22222 22p 2222 2 .222 222 22pm2222 22222 o2:p2mo
222 222 p2ofl :2,Lr,m oo2<222mo 22 o2 2 pooo 2o 2 pomo-powo 22mm.

 

powm poom poo2 poom powo pogo potp popm po:o pox: poxo porm pox2 porm poro pomo

 

222 o2
2222222 pw mo 2m p2 22 om m2 wo 2: mm op wo wo 2m po
:th2222
24 2m poo poo o2 poo om o2 pop ppp ppm poo pmm pp pp: poo oo oo
22 22222
22222
o22pzmo
Apoooupoov poo poo o2 o2 2o 22 22 o2 ppo pmo pro p2p pom mop p2 p22
2222
o222omo 2o
poqo-pooou .
poo pop po2 o2 pop oo op om pom. ppo pmo pom p22 moo mpo poo pmo

"on?“ “5..

10m

-55-

V02?-

Natalie“

 

 

T12} lid-SRO

£3.53. IL TIL-21';

?%

edem H1233 wHfiamgm mWfiHmm 0H2 HZUHomm om. wwo? Mmawumm <$PHLGMm Hz a
.P ,m 002....”wHZMU .20 2.03.2. 2.4mm WHEEL qumx.

-Hm ZQOo .Pwmp pfiHom

 

p222 p222 p222 p222 p222 pmwo pmgp p22m p222 p222_p222 p222 p222 p222 p222 pmmo

 

pmwm poo 22 22 mm 2o 22 m pom pm pmo pmm p22 pmo mmm mpw

pmwm poo 22 22 mp 22 2 2m poo pmw pmm mow mom mpm p22

p222 poo 22 22 mo 2p 2 p22 pap p22

p222 poo 2m 22 22 22 22 p22 pm2 moo moo

p222 poo 22 22 pmo pmo p22 p22 mmm 22p

pmmo poo 22 ppw pom p22 p22 pmm pm2 mwm p22

p22p poo 22 pm ppm ppm mom p22 p22

pmzm poo pom pmm pwm p2p p22 pmm p22 moo
p22: poo pom pmo pm: pm: p22

pwrm poo pom pwp pcm pmw pm

p222 poo ppm pmm prm 22 pmm
p220 poo pop pom pom mo
p222 poo pom 22 pmm
p222 poo 2m

p222

edem HHI...I I HLHVHI mmeéHAamm OOH WCHMU 25.023 aumu fiHfiJJIfl mmmHmm 9202.32 HZ ebmfim HI24 fiHam 6mm

LIL.»

Hammmw Om; finmebfim cwoz sauna? Imam WHH.2NImmH.p.eH<m Hm WPmMU H2 290... HQMmHm.

 

 

p222 p222 p222 p222 p222 p2so p2:p p2rm p222 p2 tup2z2 p2:2 p232 p222 p222 p22o
293 To Apmw 22wfip2o A22 2mo 22; Ifis éd A22 222 2mo 2mg
p222 22 poo 22 2. 22 pop pm ppw p2o pop pp2 22 p2p
322 Am mo 2pm S22 S22 2.. A2 A22 :2 A22 A22 A22 A22
p222 22 w 22 po2 po2 2 pp2 p22 pp2 ppm pop po2 2m
, E E E Q G. :2 E E
p222 22 2o oo 22 p21 ppw ppo pm:
A2 Apoo A22 22w Apo A2 A22 A22 Apv
p222 2m pom pop po2 22 p22 po2 pmo poo
:
2 ~.2 o\ 2 o -n pm
A22 222 A22 Amo 2mm Amv Amy A2” Apv
p2ro 2:. pmo 22 p21 2m pmo pox pmp 22
E E 32 3 E E E
p2rp 22 p22 pp2 poo pp: 2o pom
222 Amv A22 A22 Amv A: “mo Apv
p2:m po2 pp2 pow p2o ppm pmp pop
222 Ap A22 Am Am.M
p222 po2 ppp pm2 po2
A22 Apzv A22 A22 npo
p22: pom po2 ppp po2 pmo
A22 A22 2mm Apv Apv
p222 p22 222 pp2 2 .pm2
A22 A22 A2 Apv
p222 pop po po 2:
A: Am Apv
p222 po2 A2 p2m
p
p222 2m
p222

p22o

emdpm HH+IZ.II

0w

bridd .HAMLH'; Jlfimdrl.‘ .ILL

P210 CJOH

fiIzquifipaH<Mm.PZU 31 ).am H: 3P
33m Oniwdamw
mmdfimmmm Omr<mmemu W.

4343v43fl.
p. HOJW 30

mqoam 222
2:22

0 dun]

F‘Or...‘ Ilk-

 

pwwm p220 p022 po 22 p22 2 pmro po:p popm

p222 p2:: p222 p2:2 p2:2

p222 p222 p2

 

own

“wakuHOOv

mpmm
om

p222-p222u

HOG

mo
poo 22
poo 22
po2 pow

rb

0Q

‘20

\O
KT!

O
I0

wH

1

\JJ
\J1
\J‘]

}.J
R)
KN
l,..J
U1

0"
{‘0
01
*J

\N

C
0\

p22

1" 9,

H
.p

'«l
C9.

K .O
O\

31
U1

H

 

1‘ I

!
I
i
l
t

.I .3
5H!

 

 

a; .Iu-Din-DI

T412 25123.3 LMTSIEEG

ALEA 13732.3:

emdwm HIHHL.I.. UHnaUr 4232 mJUHJm 02.... JQHOmw 02.. U... MPH .22.an 2.2....H.Gm.m 2...... .mm Hume Emameam 22222.2...»
...2......Hom >222...” 00....wHH2UU 30 H203... 22mm 21H 2,2,3. demx.

 

 

2222 2222 2222 2222 H2 2 22:o 2222 22:2 2222 2222 2222 2222 2222 2222 2222 H22o
2222 Ho: 22 Pom 22 22 22 wow 222 222 222 222 222 22o
2222 Hoo 22 Hom 22 22 ~22 om pmo 222 222 222 222 22o 2mm
H222 Hoo 22 How 22 22 Ho. 22 222 222 22o H22 H22
2222 Hoo 22 go 222 22 222 mom 22m
2222 Hoo Hop How 222 222 222 Hmm 2o
H22o woo woo Ho: 222 222 222 222 222
H222 Hoo How 222 222 wwo
H 22 Hoo 22 How 222 222 222 moo 22m 222
H22w Hoo pom 22o 222 222 H22 220 222
222- Hoo 222 222 222 222 222
H222 Hoo 222 222 22: 2mm Hmw
H222 Hoo Ho2 222 2mm
H222 2oo 2o2 22 pom
22:2 2oo 22 222
2222 2oo Hoo
H22o

o§6I

HHHHHHHHHHHI—JHHH
\D \O \O \0 KO \0 \O \O \D \O \O \D \O \O :8
4r 4? ’“ 4? 4: 4? Jr 4: '“ _ Md \d \u \2 .
\o 093 0\\J:_s::\.1m F3 gm 0&2. mm
N
'\ K},
282‘
A
:—'i—-’
\DDOCfl.
\OWJV
Ai—JA /\
\O\-~l \) 23.9.“)
[‘0 V ()‘\\./\O \2/
VON 'r-J raw: :3 H
HVHWVC‘I‘J
HrskJr" A A A
0V1 H'vl 0‘1 F‘J‘ 3\.J‘I\.O "2‘4
HA {223A AHr-xt-JA
0+4 94.0umo OFJD E
0V Ovflvfi DMJ‘H
HA "4A Hrs AI-Jf‘J
O‘ ‘1 Q 10 {0‘24 '71 m H 4::
_‘f:‘v!-—JV \NV()'\V}—J\/‘
1‘
\Oi—‘Qi O [O (RF-’C‘ll‘Jf-J TL) 3 l-’
\O‘ANV WVfUV\\OV}.J\/f)\/
HAHAHAHAHA HAP"
OO\O‘ {‘O"1\)l+-H\N Fri-Ji-J‘W
A
0-2 m Ow 1.I—Jmo rx). 0 (“HI 4:- :) 7.3m H
2dvflvxjv DVDM .]V\qv f:\'/\)JM
A
POP—J JKJJW C9 I‘QKN CiH J rJ \33‘1
\DVI—JVFOVHV \Qv 14V [UV
A A
HHHHHA A A}—-’f‘\|—-’f\ l—JAIMJAI-JA
O O HHH) ()\.‘-"()\\O 37-“251 F" r” "' FJ F0 HP.) CJ\H
xova.ovr\JV()\~'m~/rov 21vamv
A
HAP—1H anHAI—IA HAHA HA («H/w
ONOOxo 1:0 02042-332 {o Hm H 0.421 3mm
\NWV_'I:V,r:Vm\/OV OIVONV wvifivgdjv
A
\0 (wow DUI m \C) C). O O 01 O\ mono mm) r :3 H m HN m
[OW-W {MAVNVCRV gV.DW]~/povo\vkjv
HAHAHAHAH" AHA A AHA
OHNNOWHI’ H" OlHOKN \OH 09.. HP)
ovHVC-gvmWIV O\V\OV HV (RVJZ'V

 

6t 9£61 §£6I

61 LE

5)
J

61 6261 si

OT. 0:}

I. T. T31,

/
u"0

\3.)

 

-'1E-II atqva

,_1 _,.

(J)
. -|
(I)

‘.
14‘

f\IT.’
U .1
"11
J1;

.l fibfid

Hu'VE H
“"ELdIJ

-4 1-—

d C. -1'LJ"LL

. -(u-

6.1.13 mu

~w...
.—

S SE

.31
. ‘1‘" I'\ l- i
In Ur.

A
&

I:AI|L’VI

v
VL KI

,, .
Tip"
2'. d

-62-

.9ng CH”
0 .4

3.1.
’ -

111

at?

Hm... WHENIWMHB»
am.” .wwd m .
E : ...... flu

’..

.4fl41flidfi

00“.”de MU

3.1.1. .2 U] u 4.:

Its-.1

3.; flu
but IL

4 Ith.‘ J!
-.-r.rn.P-..
._ DUNN
I\\k

u

HHIHL o

4.3 3
.rnhmmk

a0 w wamuwmwm

 

Hmwm

wam pmww Hmwm Hmwm ngo

ngp Harm

\L

-
V

53 Si. $5 $8

 

.44. .o
WCFID 0m:—
a...nl.|1.\40.43
a. HLLIIHHPL...

4.4-1 1.....3].
.CHHCér ..r ML

mmmzm Hoo

3114.13.31;
ftp-frag}. L.- Ml

w.“ U»Q m

ompHHm
A mmmuwoov Hoo

mem

)541441]. uaqi

Howwupmwm
Hoo Hem

\ O
\0

KO
\0

\fl

HOH

[.J

\i)

\O

f‘.
‘4.

\O
(3.

\O
C\

\0
F0
F4

\D
O‘\

‘Jl

mu

F.
i»...
\9

Ho»

\.:

'0
o

:w

NE.

H3

 

 

 

 

 

3 01.393131 S 011 OF
T L

ARJA IIE’DI CQS

 

 

III
I . I 4'

 

 

! .n A n .- . . v tI g:‘¥v§fi"‘l|.‘ ‘i‘i ".‘u[ I

 

 

Index.

-
4
6

-

fl 0.0., IIIIUOO

No

I19

I"

So

'1‘

‘I‘_..

-55-

Comparisons

1. All of the indices held rather steady in the years 1955
to 1957, with the High, Middle, and Low Re t Areas rising
slightly, East Lansing remaining constant, and the Negro
and Transitional Areas falling slightly.

2. Each of the indices fell between the years 1937 to l9aO;
all reached their lowest point in 1940. It was the Negro

ansing least.

t"!

Area which fell most and East
5. Beginning in 1941, the indices began to rise slowly and
gained momentum as time passed, with the greatest percentage
increase occurring in 1946 immediately after the war. The
area which experienced the greatest degree of rise up to
1946 was the Low Rent section of the North Side, and the
area experiencing the least was the Negro Area. Some of

the districts showed quite rapid appreciation during the

war itself. This is especially true of the Low Rent Area
which increased 38 per cent between 1945 and 1944. Slowest
to respond with rapidly ris;ng prices was the East Lansing
Area where not until 1944 did a noticeable increase occur.
Once the movement began, however, the climb was very steep
indeed; in 1947 it had nearly surpassed the Low Rent Area.
The ceclining price levels of 1949 affected East Lansing
very slightly whereas the Low Rent Area showed a sharper
decline resulting in East Lansing's superseding the Low Rent
Area in greatest percentage increase in prices since 1955.

4. The general trend of rising real estate prices was

— 605—

broken in 1949 with every section experiencing a decline

in prices except the Middle Rent Area which had experienced
its decline a year earlier. The areas experiencing the
greatest percentage decline were the Low Rent with thrteen
per cent and the Transitional with fifteen per cent. The
East Lansing Area experienced a decline of only two per cent.
5. with one exception the price indices have reestablished
their upward paths in the first quarter of 1960, with East

Lansin‘

I)

the highest, prices being 167 per cent above its
1965—1989 average, and with the Low Rent Area of North
Lansing being a close second with a 166 per cent increase.
The Kiddle and High Rent Areas fell in the middle range of
the six indices, both having about a 124 per cent increase.
The Negro and Transitional Areas stand in the lowest posi-
tion in respect to price increases. In 1960, the Negro
Area real estate prices averaged just about double their
1955-1959 base, while the Transitional was about 84 per
cent above prewar prices.

6. The one exception to rising prices in 1950 was the
Transitional Area; it continued the decline, which began
in 1949. This could under ordinary conditions, be inter-
preted as a danger sign. Theoretically, it might be red—
soned that the first indication of a falling market would

be experienced in the least desirable residential area.1

 

1 It should also be the last area to experience an increase
in price. This is born out by the data. Real estate prices
first began to rise in 1941. The increases in price were as
follows: hast Lansing area-5 per cent, Negro Area-2 per cent,
Low Rent area-7 per cent, Middle Rent area—6 per cent, High
Rent area—1 per cent, and Transitional area-1 per cent.

when supply is very scarce, every type of housing unit

will be taken even at inflated prices, but as supply begins
to catch up with demand, as new homes are built and the
filtering process begins to Operate, the least desirable
homes will be discarded first and become difficult to sell
or rent; this would be ralected in the price of prOperties
in this area. The Transitional Area Index might well be
the one to watch as an indicator of coming events in the
real estate market, assuming, of course, that there are

no sudden interrupting influences, such as war, on the fac—
tors which affect real estate prices. In other words, it
seems quite plausible that had it not been for the present
international situation, real estate prices would probably
be leveling off in the Lansing area.

7. During the war years, 1941-1945, real estate prices
rose an average of about 60 per cent for the whole of Lan—

O.

0"

sin; and about 70 per cent in the post—war years, 1946-19

The rapid rise of real estate prices in the Low
Rent Area during the war was probably attributable to the
influx of war workers. Often unable to rent, these war
workers were forced to buy. Their income level and their
uncertainty of employment tenure meant that they were in
the marhet for low—priced housing. This may explain vh*
percentage—wise, this type of housing increased the most
in price.

The East Lansing Area deviates from the other

01

.reas in several interesting respects as has been brought

out previously; (1) it remained more constant than any of
the others through the period less-1945, (2) it started
its upward trend somewhat later, (5) its increase, once
begun, was most rapid of all, (4) while the indices of
the Other areas were falling in 1949, it remained almost
constant.

H‘at could account for these peculiar movements?

1

‘he East Lansing Area would be afiected approximately the

v4

same as the other areas in respect to construction costs
and the general price level, and it is doubtful that rela-
tive changes in building activity would be significantly
different between Lansing and East Lansing. When one re—
alizes, however, that the economic base of a community is
very important in determining the pOpulaticn and income

.13

Ol an area, and therefore, the demand for housing, a pos-
sible exolanation of the differences arises. The major

gan State Col-

emeloyment source of East Lansing is Hichi
legs, and it is very likely that the growth of this insti-
tution is very important in causing the peculiar movement
of prices in Last Lansing. Another factor important in
recent years is trat East Lansing has gained great social
prestige for the high income groups of Lansing.

Over the span of years considered, the Negro Area
has appreciated in value less than any of the other areas.
There are a number of possible eXplenations for this: (1)

'dhen the Negro area was delineated, areas were included

 

which in the years covered by the index had not yet passed
into Negro use. Uhen some of these sections did begin to
be infiltrated by a Kegro clientele, there was undoubtedly
a temporary depreciation in value, which was out of accord
with the marhet as a whole and which was reflected in the
Negro Area index; (2) In many cities the Nevro area is
rigidly defined and its eXpansion almost entirely prevented.
If this is true, and if the Negro pOpulation is increasing,
bidding in the market for the limited supply is bound to
drive the prices up to abnormal heiéhts. In Lansing, the
negro pOpulation has been successful in entering new sec—
tions of the city and thus have avoided this process; (3)
Many houses in the Negro residential area are very old and
perhaps were not kept in as good repair by their owners
and white renters as is true in other areas. Thus they

have depreciated at more than a normal rate.

Chapter V

CCMPARISCNS IITH AND ANALYSIS OF FACTORS IRFLUE;CIN3
REAL ESTATE PRICES

THE dENERAL PRICE LEVEL AND HOUSING PRICES

Price changes can occur as a result of at least
three different influences: (l) chanaes in the relation-
ship between supply and demand functions, (2) changes in
production cost, and (5) changes in the value of the mone-
tary unit. This taxonomy is a rather arbitrary one be-
cause in reality all of these factors are interrelated
and could be classified under the first heading. A vari-
ation in the cost of production is really one aspect of
the supply function, and it may occur also as a result
of changes in the price level.

Certainly if the supply and demand relationsnips

were to remain constant, one would expect real estate

H.)

prices to follow closely the path 0 the general price
level. Any deviation from this path would have to be ex—
plained by other factors, or, to put it another way, if
one is to study the influence of other factors upon real
estate prices, the effect of the chansing price level must
beremoved.

Rather than attempt to compare the general price
level with all six indices of real estate prices, an ave-
rage of the six indices is used. This averaging process

is shown in Table I. The resulting index numbers were

-71..

am on H...I HHqUMR Emawmum OH; . mHt PpiP H76 04m d_..P<Mu,.P1.....U Pad cmmd a0 60..an owm
mm

34
; PH?
004600.: 8 HHUS 60w HIPH mH/fi. Pm P Mamet :26 amm HHHUAJH {Gammwm Om. ami

64(6de 0,1. Hern, mUHL BHmGHQm 3.3-3.6...db. HVMHQM. Humans. Aquanqm 60w HPmQH

OHHJ

 

mHmfi wand HHDQHm hos wand edgdeHode “)5me mama HmSmHsm. 3.33. Hummus nonmEHmH.
«was Heme moan Psmw Pdmm Pdmw Psmw Pdmm Aw<mdmmm ow deom

m Hdeommv Hummus 20.

 

Hmwc mm mm Hoo HOH H01 How HQH mm.H
Hmeo HQH HQH How HOH Ho- HQH Hom mm.H
Hmcw Hom HQH Hoo ma How How How Hom.H
Hmwu ma Hoo mm HOH H00 H00 H00 Hoo.m
Hews as an ad ad so so 0H ss.H
Hmio mo an we mH mm mH mo Hoo. m
HmHH mH ow mp mm an mm mm How. m
Hon mm HHw HQH Hom m How Hon HHo. m
Hme HHm HHm HmH HHm How How HHH Hmw. m
HmH wa Hmm Hmm Hmw Hw Hmm wa Hmm.

Hch Hmm mm Ho m Hmm Hw HmH me Hmm.

HmHo Ham Hmm mmm Hum Hp- mOH Hm] me.w
HmHV mop mHm mam mow Ham man MH Hmm. m
HmHm mmH mHH mno mHo How mew mmm HHH. m
Hme mHN mHm mHm Hem Hem mmH mHm Hmm. H
Home mmm mmH mmo Ham Ham mmn mmm Hmm.m

Hmwmnww u Hoo

 

. :72- Judas
' NuM bees

 

 

 

'A... YEAR5

-75-

then plotted on Chart I along with both the index numbers
of the Bureau of Labor Statistics Consumer Price Index,
which was used as a measure of the general price level,
and the "deflated" Lansing Real Estate Price Index.

for 1955 and 1956, Lansing real estate prices
were slightly above the consumer price index. In 1958, they
began to drcp and continued downward through 1940 while the
cost of living remained almost constant. In 1941, housing
prices started up but the general price level also rose,
remaining from ten to fourteen per cent above the index of
real estate prices. 1944 found real estate prices having
surpassed the consumer price index, and they remained that
way up to 1950. In the years 1941 through 1946, housing
prices were rising at a faster rate than the beneral price
level; the Opposite trend occurred during the years 1947,
1948, and 1949.

If the real estate price index numbers are divided
by the corresponding consumer price index numbers, an index
will be obtained which will show the "real" change in real
estate values; that is, the change in values which is not
attributable to the change in the value of money but rather
to more basic factors, such as changes in demand factors
(pOpulation and incomes) and supply factors (construction

6‘

costs and the number of new dwelling units). This deflatin
of the Lansing real estate price index is shown below and

is graphed in Chart I.

 

 

 

YEAR LANSI E. of L. "DEPLATZD"
37.3. P C5N0L1-H-L LAXSINJ Pull”
IJDE PPICZ INDEX PRICE INJEi
1955 101 98.1 105
1956 102 99.1 105
1957 105 102.7 100
1958 100 100.8 99
1959 94 99.4 95
1940 90 100.2 90
1941 95 105 89
1942 105 116. 5 88
1945 114 25.6 92
1944 155 125.5 106
194' 158 128.4 125
194 195 159.5 140
1947 214 159.2 155
1948 225 171.2 151
1949 219 169.1 a 150
1950 226 166.8 zi$~‘ 155 /2?
The araph shows (see page 72) that in terms of a

constant monetary unit,

real estate values fell slowly but

constantly through the year 1942 and rose sha roly from 1945

through 1946. From the 1946 peak, the "deflated" index has

declined st adily through 1949. However,

value of real estate is still well above the normal 1955-
19 59 level.

The evidence indicates that the increase in “rices

of real estate since 19 16, until the beginning of 1960, was

due to the inflation of the dollar. In other words, had the
price level remained csnstant at the 1946 level, supply and

’dema nd conditions in the Lansing market were such as to

cause actual decreases in rea 1 estate prices. In 1960, how—
ever, the relationship again reversed itself, with real es-
tate prices advancing at a faster rate than the general price

level.

-73-

(7
"J
1;:
U 1
*3
N
CZ‘.
C)
F3
F1
(1
21
C:
O
(D
is
U I
*r,
Z
(3

TOUSING PRICES

Let us now compare the "deflated" index of real
estate prices with some other factors in order to determine
the relationships betwean these variables.

A relationship would be expected between construc—
tion costs and real estate prices. According to economic
theory, the construction cost of a piece of property should
form the normal price around which prices of iew real estate
fluctuate. If perfect competitive conditions exist in the
market, housing prices should aporoximate construction costs

-

quite closely even in the short period. guite obviously,
many of the conditions necessary for quick adjustment to
the normal price do not exist. The demand for real estate
in a particular locality depends upon population shifts and
incomes, both of which are capable of rather violent and
sudden changes. On the other hand, being a durable product
and taking some time to produce, the supply of new housing
remains relatively stable. One writer has stated the rela—
, - . . 1
tion between new and used real estate in the Iollowing terms:
The normal price of a second hand, reproducible,
durable good is related to the value of the new
good in the following manner: (1) it can not
exceed cost of production, and (2) the demand
scnedule for the second hand good reflects both

the smaller number of services embodied in it as
compared to the new article and the fact that

 

1 William M. Hoad, Real Estate Prices, Unpublisned Doctoral
Dissertation, University of Zionisan, 1942, p. 5. It might
'be more accurate to state that it cannot exceed costofrmpro—
duction including risks of price rises and allowances for
owner's time in planning and building plus housing costs
during the building period.

 

each successive service is a little less
desirable as the good grows older...

Another complicating factor wnich upsets the theo-
retical relationship existing between construction costs and
real estate prices is that in addition to the construction
cost of the house, a real estate transaction involves the
purchasing of a non—reproducible item, namely, the lot on
which the building rests. Therefore, decreasing building
values may be partially offset by increasing lot prices.

From what has been written up to this point, one
would expect: (1) fairly close relationship between construc-
tion costs and real estate prices in the long run, with con—
struction costs gaining relative to real estate prices as
time passes, expecially since the houses considered in this
index tend to be older, (2) that normally the price would
not exceed construction costs, and (5) that some short run

eviations occur and should be eXplainable in terms of the

C11

adjustment or lack of adjustment that exists between supply

Cl:

deman

Q1

1’1

03

There are several indices of construction costs
available. The Eoechh index of construction costs for resi-
dential frame dwellings for the Detroit area seems the most

apprOpriate for our purpose. The Engineering News Becord

 

. . 2
gave the following description:

Current indexes are calculated upon an actual
survey at source of local construction cost
conditions. Material prices used are those

 

2 ”Construction Costs for 1950", Engineering News Record,

 

-77-

paid by contractors to material dealers. Labor
rates are current rates paid by contractors——
certain corrections being made in certain areas
for labor efficiency and labor shortage. Index
includes construction overhead, sales taxes,
compensation insurance and social security.

The indexes have been primarily engineered to
use as local cost conversion factors to con-
struction cost data released by the Boechh or-
ganization. Complete index formula is avail-
able in published form in'Boecxhs Inuex Calcu—
lator Tables."

Table 2 snows the Boecxh index numbers converted
to a 1955—39 base, deflated and then plotted in Chart 2 along
with the "deflated" Lansing real estate index.

Observation of the two indices shows some positive
correlation between them. In fact, if secular trend lines
were drawn for the two indices, a relationship similar to
that sugpested by Hoad and discussed earlier would exist.
There are also several variances from what would normally
be expected. host of the deviations can be explained in the

llowin

H
O

5 manner: After the changing price level has been
eliminated, real estate prices for Lansing are determined
largely by local phenomena such as population changes and
income and show some sensitivity to these factors. Construc—
tion costs are determined by prevailing wage rates and cost
of construction materials, which themselves, if sensitive to
market forces at all, would be affected by national more
than local conditions.

The gradual and almost uninterrupted climb of con-
struction costs would indicate that the prices which go to

make up the index are not very competitively determined.

Table II.

 

 

126-29:100 1935-39=100 "Deflated"
Year Boeckh Index Boeckh Index Boeckh Index
1935 78.1 87 89
1936 80.6 90 91
1937 93.9 109 101
1933 97.1 108 107
1939 98.8 110 111
19fi0 103.3 115 115
194 113. 126 120
1942 119.0 132 111
19’3 126.7 1&1 11&
19nd 1M0.0 156 12a
19u5 1'9.9 167 130
1946 165.9 173 12M
19*? 201.1 224 lug
19ue 22M.7 250 1M6
1949 221.0 2&6 1M5
Source: Taken from following issues of the Engineering News-

 

Record, April 27, 1939, April 5, l9h5 and Karch 23, 1950.

INAQX—
Numbezs

40

20

.71

100

2

.IO‘I .U¥O>JOZ

I70

4h

Hoo

I90

V0

I10

m

:02— 2 .l‘(38 0-

(DD

30

 

30

w

Richard Ratcliff says:5

The manufacture of building materials is

characterized by a concentration of produc-

tive capacity in a relatively few establish-

ments. For example, in about two-thirds of

the many lines of building products, more

than 00 per cent of the total output is ac-

counted for by the four leading manufacturers.

The same characteristic applies to items that

are produced locally. This semimonOpolistic

situation has been offered as an explanation of

the relative rigidity of building material pri—

ces...
The temporary business recession late in 1957 affected real
estate prices through 1958 and 1959 but did not stem the
rise of construction costs. In 1940 and 1941, pOpulation
decline coup ed with increased n w construction caused a
still further decrease in real estate prices while again
construction costs continued to climb.

In November, 1941, the government limited all
building to that which was essential to the war effort.
This eliminated almost all residential building and created
a relationship between supply and demand in Lansing which
was conducive to an upward movement of the real estate price
index. This movement began in 1943 and reached its peak in
the first post-we year, 1946. The immediate reaction of

the construction cost index to the building curf.w was a

ecline of about seven per cent in 1942. It regained its

C“

equilibrium, however, and beg.n to move upward but not as

m

quickly as the real estate price index.

Finally, in 1940, the demand for housing was so

great and the supply of new construction so limited that the

 

 

5 Richard U. Ratcliff, Urban Land Economics, New York, 1949,
p. 187-188.

-81—

resulting pressure on real estate prices brought the index
above the Boeckh Construction Cost Index. Eut this supre—
macy was short—lived because when price restrictions were
removed in November, 1946, construction costs skyrocneted
and overtook the deflated Lansing real estate price index,

whicn itself had begun to fade slightly.

SUESLI AID LEIAN' sND HOUSING PRICES
After changes in real estate prices due to the
depreciation of the dollar have been eliminated, the move-
ments anion the index exhibits should be eXplainable 1ar5e—
ly in terms of the adjustment between supply and demand.
To get an adequate measure of these factors is very diffi-
cult; it is imdossible to separate the rental from the home
buying demand and somewhat inadvisable, even if possible,
because changes in rental demand affect real estate prices
indirectly; it is impossible also to get a satisfactory
measure of effective demand. Figures on incomes are very
meager, especially those measuring Changes in incomes for
the residents of Lansing over a period of time. Data re-
garding supply is also difficult to obtain and interpret.
One shodd consider vacancies and new construction, but the
only measure of new construction is the number of building
permits issued, and the question arises as to whether one
should count enly those buil in; permits issued for new
dwelling units or include building permits issued for repair
and additions. The measure of supply used in this chapter
is simply the number of new residential dwelling units begun
in Lansing in each year frem 1935 to 1933. A discussion of
the factors which influence and determine the potential de—

.-

mand for housing for a particuia: area follows.

—85—

The first Obvious and crude measure of potential
demand is the total pOpuiation of an area. Changes in to-
tal population vary directly with changes in demand although
in a rough fashion. A more refined measure is the number of
families, ior although there is a positive relationship
between an increase or decrease in thegnpulation and an
increase or decrease in the number of families, the changes
are not necessarily directly preportionate. For example,
migrants into the city may be single and not normally occupy
a family dwelling unit.

vaiously not all families in a locality represent

‘1

potential demand for new or vacant used housing. Many fami—
lies already own their own home or rent a house. Thus an
increase in the net demand must come from new families in
the area. The source of new families may come from either
of two sources, immigration or marriage.

Immigration has been a primary factor responsible
for the rise of most cities. There is no information to

show the proportion of single migrants as compared with

those who come in family groups. The prOportion undoubtedly

C0

varies among cities ccording to the type of employment
available. It was assumed in this study that about one—fourth
of the net immigration or emmigration from a city during nor-
mal times would be single. During the war, however, it was
assumed that one—half were single. harried immigrants have

a direct effect on housing dema d, whereas single individuals

need only rooms immediately and represent a potential de-
nander of housing only in the unrorseesble future.

:ew families created by mETTiE¢ES are an important
source of increase in the demand for housing. Ihile some

newlyweds do not occupy separate dwellings immediately but

1
H3
( ’1
p.
F.)
HI
{D
U)

rather double up with relatives, most newly-formed

q

require separate quarters. Trerefore, anyone attemptiné to
measure housing demand should gather statistics on marri-
ages in the locality, both the number of marriages in the

A

recent past and cat. concerning trends and the correlation

01

of these trends with other factors. for examnle, the mar—
riage rate seems to be sensitive to chsnaes in economic
conditions, decreasing during the trough and increasing at
the peaks of the business cycle. See Chart 3 for the trends
in marriages and divorces for lensing, Michigan, from 1955
to date.

"Population growth by natural incr ase does not
mean an immediate increase in housins need. The effect of
births on housing requirements is not felt for some twenty
to twenty-five years after the events, when the newcomers

have attained marriageeble 8‘8 and begin to establish new

C)

family groups. This fact points to the imoortance of the

0)

.ge distribution of thegnpulation as a forecaster of future

housing needs, for the number of persons who are to attain

)

marriageable age during a given period will constitut‘ an

w

important part of the new demand for housing."4 See the

 

 

.
5
8

-

n
I 4:

£33. .3350:
:00 5.3.. a of. 23:31?

:01: Oh. IUI<300 O—
‘I£(I 20.5.0" IIOCO 8. ‘2 ICE

3

 

115

Tans}.

 

a5-_49
5o——54
55--59
60—-5u
65~-69
7o--7u

75--Above
Under 1 yr.

Over 21

SOURCE:

E DISTFIEUTICN
-R LANSING,

19:0

U. S. Bureau of Census,

0\

..
‘
C >'.

' H‘

‘-~'fl" Pi“:
g...Lbf;IU.in\T

 

25,370

Vol. 2, Table 32.

 

A.

enclosed Table 5 for the age distribution for Lansing in
1940. This chart shows a relatively large number of in-
dividuals between the ages of 15 to 29 who would be likely
to marry and form new families within the 10-year period
of 1940—50.

The difference between births and deaths for each
year give the pOpulation change due to natural causes. If
the difference between this result and the total estimated
pOpulation change for the year is computed, it is possible
to estimate the net migration.

The importance of new marriages as a factor in
increasing demand for housing has already been mentioned.
Those influences which are dissolving families, name y di—
vorce, death, :nd separation must also be considered and
subtracted from the marriage factor in order to derive the
net chan . The trend in the divorce rate has been continu—
ously upward. The divorce rate, like the marriage rate, is
responsive to fluctuations in the business cycle; it declines
during periods of economic stress, but the cnanyes in the
divorce rate are smaller in amplitude and shorter in dura-
tion than in the case of marriages.

Since death is more than four times as important
as divorce in dissolving families, it is important that this
factor be carefully considered.5 Ehe death of one of a

married couple may give rise to a reduction in the quantity

 

5 Ibid., p. 91.

of demand for housing. In many cases, the survivor moves
in with relations or tahes us an existence in rented rooms.
It was assumed in this study that one-fourth “he number of
deaths of any year should be subtracted from the net demand
factor for that year.

In conclusion, a complete analysis of housing ae-

mand would concern itself with all factors WfilCh give rise

it vould discount for those

n1
:3
m

to new families in a city,

(

factors wnich result in the dissolution of families. The

major factors which create new families in a city are ne

immigration and marriages. Pa

(0

t immigration can be estimated
by takin" the change in the estimated oooulaticn of a city
for one year and subtracting from it the increase in pOpula-
tion due to natural increase. The resulting figure éives
one an estimate of immigration for the year; allowance must
be made for sin¢le immigrants, and to get the figure in terms
of families, it should be divided by the average family size.
An analysis of past increase in demand due to mar-
riages can be made. Statistics on number of marriages are
given for most cities and if not available, can be estimated
from county figures. the breakup of families due to divorce
and death must be taken into account and allowance made for
them. Future predictions of the marriage variable can be

based on studies of cast trends in marriayes and divorces

L

"ifi

and the underlying causes aIIecting them. An index of changes

in housing demand based upon the above elements is employed

the adjustments are arbitrary and

H.

in this study. Kany o
inaccurate, but it does give a quantitative cicture of the
procedure for Lansing which can be compared with fluctua-
tions in supply and prices of real estate. Tables IV and
V show the factors which were considered, the adjustments
made, and the final net addition to potential housing de—
mand in each year.

Table VI brings together the measure of supply
(number of new dwelling units started in each year) and
demand (number of new families in ea h year) and the de—
flated real estate price index. Column 5 snows the ratio
of demand to supply, that is, the number of potential deman-
ders per unit or supoly. This was calculated in order to
facilitate comparison with movements in the real estate
price index. Examination indicates the critical ratio to
be about four. This means that, with minor exceptions,
when the number of new families is more than four to each
new dwelling unit, an increase in fundamental real estate
prices results, and when less than four, a decrease in pri-
ces results. This is shown graphically in Chart 4. Here
the scale was made equal to the ratio a so that if the ny-
pothesis is correct, the real estate index will generally
Show an incr ase whenever the graph sh ws demand to be
above sunoly and a decrease whenever the supply index ex-
ceeds the demand index in the same year. Observation of
the chart indicates that this is usually the case; supply
exceeded demand throuvh the years 1957-1942, and Iundamental

real estate prices were constantly on the decrease. Likewise,

\

amdwm H<.

 

NHV va va NPV va Amy NNV

 

Mdedemm* zzadmd zcudmd ZmHSde amd HJBHnddeo: Zed HBBHmddeodt 20. 0%
Moms wow. wow 0% 0% Huodmmmm o: iJqudeo: Pm.u:mdmmn wow 2mg
rmomHsm mHHdwm Ummdwm 00H vaanv H: NPV mH: me wmdmosm amaHHHmm
Hews “mg PmPP Now add mama -Hsmm -PQN
Howo woo 4 ago nHa NNm +mem +mmmo :mNo
HmWN m: mmm Hmo NJ“ wwo mPh a mum -Hmm
Howm mP how HNON Nwo HouH uHomo 1 Now aHmH
Sum mP wow Hoo mOH mm : mmH . mmH :Hm
:i No.Nmm HPcm NPm NHo -mme -wme -Nm
HWPH Nm.sa Hmom Nwo mNm + mmw P HHw P mm
Hum Nw.Pmo Sm NHH HHH -NPfi -WNPm :mwm
HmP Nm.Nmm Homm mmH How. PmmP PHHmo +mmo
HmP Nm.HHw HONo moo mom -HmPo . NNo -Hmm
Hum NP.amm Hmm N NPm mom -momm :Howw -mmm
Hum mo.mmm HO mP NNm Hmoo +Pmmm +mmmH + mm
HmPN mP.mmm mmmm moo flmm PmmPP +Hmmw + mm
PPPP PP.omN deN New P Pmodm PWNNm +m. .
Hum mH.mmo mHmH Nam wam . mmw . PHm -HoP

*stodadeo: on mdeamdmm vo©CHdeos. dedSm. Qmmdwm. oozsdw BdeHmmmm mug QH<OWomm
5mm oddeSmQ wwoa Pym <Hde mddedeom Umwmddamdd 0% add fiHomems Umwmwdamsd ow
mmmwdw.

-91..

emUHw <.

 

 

va Nov NHoV NHHV NHmV NHPV NHPV

:mdde mdedem@* UH<oHomm deHamdmm* wdewmmn Ummdw medod 2mg 2ma

w 3 H5. ma fimddemmm wow Hsmwma UH<0domm NH\m Mo. ow NH\P do. ow Umamsa
Mmmd oocsdw wow bmzmHsm nonsda wow thmHsm UH<oaommv Ummdwmv QMH wNquHmv

I Hw

S3 5% ma wwo 8m do ZN P mm
Hmwm HHow NmH “mo mmm wwo mom PHomw
waN HWNH um HOH mNN mom Hum P Pmm
Hmwm NNo WNH NHP mHN Pm“ HmP P Pm
Hm m Hom Nww POO mNm mom moo P wwo
Hm HPPm mom PHm mmN NNo HMN - mOH
HmPH Hmwm mom NmN mwm mm mm P Nmm
Hum HmHm mam mm mNm mPo HNm - mm
Hqu HPHm mmH me “NH mmm mHm P NmH
S N 5.». NNN mmm 1mm was now P H3
Hum HmNm mm. an mmH NHP HmN P mam
Hum m1mm H Nm Howm mmm HHmo HmP PH H
HmPN m_WN HwPo NHm wmw HHPP mos PH 0
Hum Hmw HHPP mmm “Ho mam Hmm Pwam
HmPo Hmmw mPH wwo wwm NNw Hmm P Nw
*2“

:SJJHmmmm mod Hmansw mdedem@ d% stdem bmwomsdmmm HmSmHsm defichdHo: Hm ow oocsdw

@O©CHdeos mam azHaHwaHsm usadmd ow Emwdemmm wow arm oocsdw 6% dfiHm wmwomsdmmm.
mmaw bdoommsdm Cmmm wow stmHsm dSm ssadmd ow deowomm.

in 1945, the demand-supply ratio exceeded 4, in fact, shot
up to 16.5, and 'eal estate prices reversed themselves.
Excepting 1945, when the ratio slipped to 5.6, this rela—
tionship existed through 194 . The slight drOp below the
critical ratio in 1945 was not sufficient to change the
movement of prices, pro ably because of the backlog of
demand from the years 1913 and 1941.

The significant exceptions to the rule of 4 are
as follows: (1) In 1957, the demand-supply ratio was
hiéh, 10, indicating that prices should have risen. While
failing to r as, they did remain constant. Two possible
explanations for this reaction are: (a) There may have
been a bachlog of vacancies at the time which allowed for
the absorption of the excess demand without too much pres-
sure on facilities and no effect on prices, and (b) Late
in 1957 there was a general business recession UfiiCfl affec—
ted incomes end employment and changed the ratio between
effective demanu and potential demand enou5h to mzxe the
critical ratio in this particular year higher. (2) The
second exception deals with deflated price movements after
1946; these movements were downward, yet the supply and de—
mand relationships in 1947 and 1948 do not justify such a
drop. In 1947 the demand—sujily ratio was just a hair under
the critical ratio of 4, being 5.9. From this, one would
eXpect prices to remain about constant, and with the large

backlog of unsatisfied demand in l945, even to rise. In

Table VI.

 

No. of New Net New Ratio of Deflated
Dwelling Unit Demand in Demand to L. E. Price
Year Started in Each Each Year Supply Index

Col (2)f(l)

 

1955 41 65 1.6 103
1956 109 1095 10.0 10

1957 139 462 3.3 100
1938 10+ us 0,5 99
1939 208 230 1.1 95
1990 290 -201 90
1941 420 L72 1.? 89
194 20 -264 as
194 #6 +761 16.5 92
19 ' 30 +197 6.6 106
1945 7LL +269 3.6 123
1946 298 +15 1 5.2 1M0
1947 367 +1 ’ 3,9 33
1948 350 +1E35 5.6 151
19u9 ! 5 + 75 . 1.2 130
1950 496 (first 6 mo.) 13;

Critical Ratio - ”.0

 

 

 

»
4
.

‘3 “805.40..-

52- 2 :53: O.
too it C 0“ l8."‘ - s I

lil

.-

1948, the demand—supily ratio was 0.6, and thus an increase

ccordin: to the in—

4.4

in prices would be expected. However,

(‘0

dex, "real" housing prices declined in these years. In
1949, the ratio dr0p ed to sucn an extent the the drop in
prices which occurred could be justified on these grounds,
but the 1947 and 1948 movements seem to be contrary to ex-
pectations. the only possible explanation that comes to

J—

mind hinges around the removal of price restrictions on

Q,

}_._

most goods in Jovember of 1945. This resu‘ted in a rapi
rise in the consumer price level in 1947 and 19a8, a rise
that was possibly too rapid for the real estate market to
Keep abreast. in other H rds, the real estate dollar had
not yet depreciated as huch as the general consumer's dollar,

nd as a result, it was not entirely valid to deflate the

01
,

real estate price index by the full amount of the consumer
price index in these years. Chen the purchasing power of

the dollar changes rapidly, real estate orices lag in their
adjustment, and this is reflected in the deflated real estate
Index as a drop in fundamental values. The total size of
expenditures involved in a real estate transaction was such
that the price increases seemed prencmenal even though they
were pr0portionately lower. Ihus there was the incentive

to postpone the purchase of a home in that period.of high
prices, at least for a while. ihis is not as true for goods

involving smaller expenditures; therefore, one would eXpect

a lag on the part of real estate prices.

The limitations of the quantities used in this
analysis should again as emphasized. In addition to their
other inadequacies, the supply and d an.an; measurements show
only successive year- to—year changes, whereas ideally, they
should be cumulative in nature by adding the unsatisfied
demand from the previous years.

Perhaps another shortcoming is that the quantities
compared sale all 01 the same year, that is, the real estate
price change in any year was compared with the supply and
demand of that same year. The same is true of the consumer
price level; the real estate inde was deflated by the con-
sumer price index number of the sane year. again, this
procedure may have been faulty in that there are undoubtedly
lags and leads between these factors. Some superficial

reflection was do he on this point, but no constant rela—

‘J

tionshio superior to the one used could be ascertained.

lly, if the supply—demand “atio is to be used

I-IJ

in predicting future price movements, much caution should

be used, first because it is not a articu la rly sensitive

‘

measuring tool, nd second, because there are many other

(‘1

factors, especially the general price level, which mi5ht

counteraot its influence.

CHAPTER VI.
CONCLUSION’

The aim of this chapter is to indicate something
of future trends in the Lansing real estate market. The
focal point will be an attempt to predict the future course
of housing prices. To accomplish this with any degree of
success means examining each of the factors which influence
prices of real estate, determining their future course and
the degree to which changes in them affect real estate
prices.

The really perplexing problem is the present
international situation. The future course of international
events will be greatly influenced by the emotions and va-
lues of the peoples of the world and their leaders and thus
evades analysis, at least of the economic type. Because
of this, the procedure will be to set up a number of models
making in each case a different assumption as to the future
course of international events. An attempt will then be
made to analyze the Lansing real estate market under the
assumptions associated with each of the models.

First, let us be optimistic and assume that the
Korean war will and quickly, within six months at the most,
and that the ensuing peace allows this country to resum
normal economic conditions, that is, conditions similar to
1939. There will be military spending but not a garrison

state, freedom from most government controls, and approxi-

mately the same tax burden. In this economic environment,
ahat would be the course of future real estate prices?

The local factors would.seem to indicate a
slightly decreasing "real" price for Lansing real estate
as a whole. Demand seems to be leveling off. There were
slight increases in population in 19M9 and 1950 but nothing
to compare with the immigration and marriages of 19M6,

1947, and 1938. Population increased by approximately
5,000 in 19U6, 4,000 in 19u7, and 5,500 in 1948, Whereas-
the population increased but 800 in l9h9, less than the
1336 change due to natural increase. Harriages in l9h9
were also down, being 203 less than 19M3, 99 less than
19H7, and 535 less than l9h6. This same trend seems to be
continuing through 1950.

On the supply side, the construction of new
dwelling units started in l949,'s~'asr the greatest number
since l9fll. An examination of the building permits issued
for new dwelling units in the first six months of 1950 shows
a total of hhé, showing that this year has already surpassed
any year covered by this study. It seems evident that the
supply-demand ratio for Lansing this year will be well below
the critical ratio,1 and that the influence of these com-
bined factors will pull housing prices down.

There are other factors counteracting this supply-

 

1 For a discussion of the develOpment and meaning of this
concept, see Chapter V., p. 90.

demand influence. For example, incomes, as measured by

the average weekly earnings in Michigan manufacturing in“
dustries for Ingham County, show a continually rising
trend. The General Hotors Corporation, which is a basic
employment source for the area, and the UAT—CIO Union have
signed a five-year contract continuing the "escalator" wage
clause which attaches wag s to the consumer price index

and which establishes a floor below which wages cannot fall.
Presumably, then, incomes and employment will stay high for
sometime in this area and will tend to counteract the low
supply-demand ratio to some degree, though not completely.

F1

iahen as a Whole, local f

rD

.ctors point toward slightly de-

creasinr prices.

E)

JJ

This somethat ,

fJo

repressing local nfluence on the

(

marxet could easily be nullified by a rising general price

1

level, and thus the probable course of this fa

O

tor must be
analyzed. The Bureau of Labor Statistics' Consumer Price

- ., / , - .
Inaex rose rapidly from 19Uc througn 19-

L8, then reversed

its trend in 19U9,

(0

.nd continued its slight fall through

the first quarter of 1950. Indications were that condi—

of demand was being niped out, and that the market was

3

changing from a seller's to a uyer's one. in snort, under

the assumption of a normal peace time economy, it appears
that the price level would level off and start a slight and

slow decline, vhich would continue as conditions became more

normal.

In examining construcfiflxn1cost trends, the gen-
eral assumption is that rising construction costs will
have an adverse effect on the amount of new construction

and thus might change the demend~supply relationship. In

A.

O

.1 7? P' ‘ ”'7 m - 1 m w — -v
une march a3 issue 0: tea :ngineerln, NGIB Record, the

 

following statement was made with regard to the outlook
2

for construction costs in 1950.
The stability that marked.prices and wages
last year also promises to continue into
1950 along with ample production of materials
and supply of labor to meet the volume of
work in. cint The 3333 cost indexes (vicich

measure the movement of materials, prices
and ”“re rates) should vary from their lQUO

NJ...) ’I
values not more than 5 per cent and could
hold inside an even smaller range.

If this analysis is correct, construction costs should not
interfere vith the large volume of anticipated residential
building.

To summa ize, assuming a quick return to a peace
time economy, the supply of new residential construction
should be high relative to potential demand. Incomes and
employment will remain high. The general price level is
likely to fall slightly, while const uction coats remain

about constant. The conclusion is that Lansing real estate

prices on the average will drop slightly in the immediate

 

2 "The Cutlooh for Construction Costs in 1950", Engines;-
ing hens-Record, Iarch 23, 1950, p. lhu.

 

r101-

future. In regard to specific areas, East Lansinf values
will probably hold up best, vhile those in the transitional
area will fall most. Under this assumption, 1950 would be
an excellent time to sell, vhereas buyers should, perhaps,
vait a short time. Horever, buyers would not be taking

on too great a burden of debt, since incomes promise to
remain h 5h, while prices apparently will fall steadily
but slowly; Long term debts should be avoided; a high
down payment and high monthly payments would seem prefer-
able.

“Mat will happen to real estate prices, assuming
that the war lasts longer, a year or two, and that after
this time the situation is such as to require a relatively
large military budget and some economic controls?

Under these conditions, much depends upon the na-
ture of the economic controls installed. The natural pres~
sure on the general price1 evel Would be strongly upwa rd.
The United States is already at practically full employ-
ment; shifting production from consumers goods tom ilitary
suo:lies would mean a decrease in supply without a corres-
ponding decrease in incomes and effective demand, and a

very strong inflationary pressure M’OL d result. The degree
to which this inflation is realized would depend upon the
scooe and success of price control and the derre e to hich
the government taxes away the excess purchasing power of

individuals and.the excess profits of corporations and

~102r

controls bank credit. Gauging from the

8

ionary pressure would not be

+C.-

is difficult to fix ca.we at the necess
n:rhets spring up; and price

stooped

completely.

control and rationing in one

sphere simply divert the purchasing po‘Ier to another area
of r‘oods \ith a consequent inflation nary pressure in their
values. At the beginning, purch. ing po er would probably

be concentrated in those new durable goods (automobiles

television, electrical ap oliances and, perhaps, even new

housing construction), rationed or non-exis—

the near future. result vouli be t1: t effec-

demandf or used real estate would not immedia in-

sly

and mi Sht even experience a temporary

81 O vnerl rr
nsumer Price Ind

this initial period is over and

rationing has be. aft

L‘ . .. :v 4— w
of these new goods shed,

is likely to turn to

This

res true of
beginning in 1943.
One would expect some change

supply relationship . One of the first

is usually in the resile en tial buil ing

some price

used real est: te ritn sharply

.8
prices Id

1.‘ D
-...\.,-.

ate t lithe

ex. HO'f-ever,

1,
Ci;

er the sto tiles

purchasinu power

increas-

the Lansin3 er a

-e.
in the local dema nd-
wartime restrictions

field, a measure

which Wv'ould drastically cut the supply of new dWellin3

\J

c1”

units. -he imredia effect on potential demand,would

like y be a decrease. Kobilization of men in the armed
iorces would mean in eff ct the dissolution of many fami-
lies and a resultin3 dec1 ease in demand. This tendency
would be counteracted by the immi3ration of factory rork-
ers to man defense Jobs, but this inward movement would
not take place as Quickly as the outWard movement of men.

media ta 1, supply would decrease but demand would also;
the ratio of demand to supp-y probably would rise sli3htly
but not enough to affect real estate prices 3reat1; As
time passed, supply would oecreas 9 even more, assuming
continued controls, and demand would begin to increase
The derand—supply relationship would move up to a point
beyond the critical ratio and thus an inflationary influ-
ence from these factors would result.

Construction costs, which though inconsequential

O CB.U.

e of restrictions on build cin3, would remain high be-

0'}

('1

cause of the government demand for labor and material.
Increased down payment requirements and financing costs

would dampen the market to a slight degree.

Although local supply and demand conditions are
important elements in determining real estate prices, for

the nex few years at least, ass umi n:3 war time conditions,
the major factor apparently will be the 3eneral price level.

There are conflictin3 opinions as to what will happen to

‘
I
.. 10 :3,—

the general price level if the Korean situation remains
localized. 1a-y expect inflation, but at least one writer

feels that there are counterecti n3 forces which mieht Dre-

'2
/

vent severe inflation. He st tes

(I)

This is not at all like 1930 an nd 19 . Then,
we were comin: out of a lon3 depression vhen
demand for durable good had been subnornal.
The volume of consumer credit was small.

Very few" peeple h ad anticipaet d a sir. 170:},
we seem to be comin3 to the end of bus ss
boom of several years duration. Consumerr cre-
dit, at $19.1 billion at the end of Iay, is

at the hi3hest level on record. Durin3 the
past three years consumer buyin3 of durables
has been stirulated several times by the warm-
ing up of the cold ya.r. There isn't much room
left for consumers to buy ahead a3ainst the
possibility of war, for they have been mort-
3a3in3 their incomes increa sin3ly for several
years. It is very doubtful that the volume

of consumer credit outstanding Jill increase
much further. If taxis are going to be high-
er, many consumers will hesitate to maintain
even their present debt load...

The chances are, unless this develops
quickly into Torld War III, that the moderate
increase in 3overnment spendin3 for defense
presently envisioned wil.l serve primarily as
a counter deflationary influence rather than
as an inflationary influence. The downws rd
pres sure on tb ne comvodity price structure dur—
ing the rest of tnis year and into early 1951

least is likely to be so great th mt it will
take more than a few billion dolls rs of addi-
tional government spendiny to offset it.

‘-"Q

There is much to be said for Walters' analysis, but one
should be acutely aware of the assumptions upon nhich it
is based: (1) localized limited war, (2) "moderate increase

in 3overnment spending for defense", and (3) increased taxes.

 

3 Frank R. welters, "Vhet's Ahee.d for Prices?" The YeNa-
zine 9; Tall Street, July 15, 1950, pp. 410, H41.

 

-105-

To summarize, the future of real estate prices
under this assumption depends upon many imponderables;
(l) the size of the military budget, (2) the degree and
kind of taxation, and (3) the scope and effectiveness of
economic controls. However, it may be somewhat reasonable
to expect sli3htly rising real estate prices in the imme-
diate future, more rapidly increasing prices aftercnntrols
on consumer goods have been thoroughly installed, and much
more rapidly increasin3 prices directly after any complete
demobilization. Under the conditions hypothicated in this
case, the present would be a good time to buy real estate
in Lans_ng. Accordin3 to the information derived from
comparing the area indices over similar periods of world
War II, low priced housing would probably appreciate most
in value and the East Lansing Area least during the mobi-
lization period itself. Though all areas are likely to
appreciate greatly after demobilization, if fibrld War II
is a reliable 3uide, East Lansing would appreciate most.
And again over a long period of time, assumin3 a continued
large enrollment at the college, it is the East Lansing
Area which would best retain its value. There are two rea-
sons for this: (1) the area is not as susceptible to gen-
eral business changes as most areas, and (2) this area has
acquired a high amenity value. Under the assumption of an
all-out war, the influence would be much the same as in

case two, but intensified. There would be severe infla-

~105-

tionary pressures at work on the general price level. Kuch
would be contingent upon the effectiveness and degree of
economic controls and the morale of the people. It is pos-
sible to imagine such a degree of fear having been generated
toward atomic bombing that peOple would have no disposition
for city living, in which case real estate values would

fall drastically.

In conclusion, the limitations of this study
should be reemphasized. All of the factors influencing
real estate prices were not considered, and those which
were considered were not adeQuately analyzed. The inter-
actions between economic variables are so complex that it
would be impossible to consider and andyze adeQuately all
of the factors determining the price of any commodity. Pre-
dictions of future trends are based primarily upon what has
happened in the past under similar conditions. This is
dangerous because history never repeats itself exactly.
This is an analysis of one local situation and cannot be
generalized to other areas pg; fig.

Since there are many limitations other than those
explicitly mentioned above, it would not be advisable to
invest heavily in real estate on the strength of the policy
conclusions in this study alone. However, it is hoped that
this study may prove of some assistance to interested per—
sons when used in conjunction with their general knowledge

and other information.

BIBLIOGRAPHY

Croxton, Frederick and Corden, Dudley J., Applied General
Statistics, New York, 1939

 

 

 

Croxton, Frederick and Cowden Dudley J., Practical Busi—
ness Statistics, New York, l9LS

 

 

Dean, John P., "The Orientation of Housing Research",
Journal of Land and Public Utility Economi s, 1097, XXIII,
”7—3-"~ ——

70‘00

Edmonds, J. P., Earlv Lansing History, Lansing, Kichigan,

19m

Ely, Richard T. and Tehrwein, George 8., Land Economics,
New York, 1940

 

Engineering News-Record, "1949-50 Annual Report on Con-
struction Costs" Ehgineering News-Record, March 23, 1950,

CXLIV, no. 12, l 3

 

Firey, Talter, Land Use in Central Boston, Cambridge, Hass.,

1947

Hoad, William, Real Estate Prices, Unpublished doctoral
dissertation submitted to the University of richisen, labs

 

Hoyt, Homer, The Structure and Grovth 9: Residential Neigh_
Igzgggds in_American Cities, Washington D. C., 1939

 

Hoyt, Homer, "Economic and Housing Survey of the Orlando,
Florida Hetropolitan Region", Journal 9; Land and Public
Utility Economics, 19h7, XXIII, pp. 219—227

 

O'Brien, Robert W., editor, Readings ig General Sociology,
Palo Alto, California, 19£7

Ratcliff, Richard U., Urban Land Economics, New‘Yorh, l9h9
.atcliff, Richard U., "Th
.9

A Rejoinder", Journal
19h , XXIII, S1

e Orientation of Housing Research:
Land and Public Utility Economics,

Twentieth Century Fund, American Housing, Nem'York, l9h4

 

United States Bureau of the Census, Housing, Supplement 39

min:-

the First Series, Housing Bulletin for Michigan, Lansing
Bloch Statistics, washington, D. C., 19U2

 

falters, Frank R., "What's Ahead in Prices"; Hagazi-e g_
wall Street, July 15, 1950, XXXVI, no. 8, L10, Uhl

 

Weimer, Arthur M., and Hoyt, Homer, Principles g: Urban
Real Estate, New York, 1958

flyngarden, Herman, Ag Index 9: Local Real Estate Prices,
Unpublished doctoral dissertation submitted to the Uni-
versity of Hichigan, 1927

 

 

 

"‘titamt