Beige Book Report: Dallas
December 9, 1970
The major portion of the data for this report was gathered in a survey of fourteen of the larger savings and loan associations in the Eleventh District. The associations surveyed reported: (1) Most associations had recorded deposit inflows since November 1969, with the weighted average rate of inflow of 4.0 per cent (2) The majority of associations had recorded increases in loans ranging from 2 to 15 per cent, yielding the weighted average increase of 4.4 per cent since November of last year (3) Commitments at most of the institutions surveyed were up substantially over last year (4) Nearly two thirds of those surveyed had recently reduced their rate on home mortgages, with the most quoted rate in the range of 8 1/2 per cent (5) About half of those surveyed felt that residential construction was being limited by huge construction costs (6) About half of the associations are now making loans on mobile home purchases, although these are fairly new loan programs (7) Most report that the price range of homes being constructed has risen somewhat in recent years, with the largest volume being constructed in the $20,000-$30,000 price range.
General economic conditions continued to show a very moderate upward
trend in the Eleventh District. Unemployment in Texas continues to
remain well below the national average, while industrial production
has edged upward slowly in recent months. Eleven out of the fourteen
savings and loan associations surveyed had recorded fairly
substantial deposit inflows since November of last year. Deposit
inflows ranged from 2 to 15 per cent, with many in the 7 to 8 per
cent range. Moreover, twelve of the fourteen showed an increase in
loans over the period since November 1969, with eight of these
associations recording annual growth rates for loans in excess of 5
per cent. Most of the associations had commitments exceeding those
in November 1969, with four of the associations showing commitment
levels more than twice those of November of last year. Of the
associations surveyed, nine reported that they had reduced the rates
they charged on home mortgages. Most of these had reduced their
rates by 1/4 to 1/2 per cent in recent months. The majority of the
associations reported a current quotation of 8 1/2 to 8 3/4 per cent
on home mortgages. Rates varied somewhat, with some associations
charging 1 to 1 1/2 per cent origination fee. The 8 1/2-percent rate
was typically on "prime" or "good conventional 80 percent" loans.
The majority of those surveyed felt that residential construction is
being limited somewhat by construction costs. However, several felt
that reduced interest rates might offset a portion of this high cost
of construction. Should rates decline and additional mortgage money
become available, most felt that only a very limited amount of
demand for housing would continue to be deferred because of
construction costs. However, one respondent noted that he expects
the main volume of home building during the next five years to
continue under the FHA or HUD programs. Half of those surveyed
reported that they are now making loans on mobile home purchases.
Since this type of loan is relatively new, only a few of the
associations were able to supply figures on their volume of mobile
home paper outstanding. Most of those participating in mobile home
financing estimated that only a small portion of their deposit
inflow will be channeled into such paper. One association estimated
that in the future, about 6 to 8 per cent of its deposit inflow
would go into mobile home financing. The majority of those surveyed
indicated that homes in the price range of $20,000 to $30,000
constituted the largest volume of homes being currently constructed
in their areas. Most indicated that the general price range of homes
being constructed had risen substantially (20 percent plus) since
1967. However, three of the respondents indicated that a greater
number of lower priced homes are being built now than in 1967, so
that the proportion of higher priced homes being constructed has
declined. A number of those surveyed indicated that, as funds become
available, both short-term and long-term interest rates should
decline and there should be an increase in the number of homes being
constructed in all price ranges.
Current levels of economic activity within the Eleventh District seem to indicate that the regional economy bottomed out sometime late this summer and is now showing a very moderate upward trend. Modest gains in industrial production have been made, as the decline in durable goods manufacturing was more than offset by high levels of nonmanufacturing and oil activity. The decline in durable goods was due mainly to declines in transportation equipment and machinery. The return of the auto workers to the GM assembly plant at Arlington, Texas, should have a positive effect on durable goods production; however, this may be partially offset by further downward adjustments in the aerospace industry. As a whole, industrial production in Texas during the first ten months of 1970 has shown a significantly smaller increase than in previous years.
There have been recent modest gains in employment in the District, with the unemployment rate for Texas running substantially below the national average. However, projected growth in the labor force is expected to outstrip gains in employment. Construction—particularly nonresidential construction—has shown some improvement in recent months, while department store sales in November were up only 3 per cent over the same month last year.