In this post I will re-examine another common “fact” about Sears homes that is frequently mentioned in the media and on internet sites.
Why Did Sears Stop Selling Houses?
"By 1940, home designs, specifications (and building codes) had become more complex, detailed, and demanding, including stricter requirements for electrical wiring and plumbing, and Sears abandoned the dwindling 'do it yourself' home market."
"Increasingly complex house designs, the Great Depression, and federally sponsored mortgage programs (FHA) were the three primary reasons that Sears closed their Modern Homes Department. "
"Sears stopped its Modern Homes catalog largely because during the Depression years leading up to World War II many people couldn't make their mortgage or credit
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These reasons are cited again and again as the reasons Sears stopped selling houses. Let's take a closer look at the facts.
The State of the Sears Modern Homes Department in 1940
Sears actually stopped selling houses in late 1942. However, these websites state that the business was irreparably suffering and "dwindling" by 1940. That is patently false.
In 1940, residential construction in the United States was booming and re-approaching levels experienced during the 1920's. The Sears Modern Homes department had 16 district sales offices and 120 salespeople. In 1939 Sears sold about $7 million in houses ($117 million in today's dollars).
Sears stopped offering home financing way back in 1933. Foreclosures from a decade earlier and a federally sponsored mortgage program had nothing to do with Sears exiting the business in 1942.
The Federal Housing Administration (FHA) was created in 1934 and it set standards for new construction. The Sears models were "well within FHA requirements", according to Sears press releases, and meeting these supposedly "complex" housing standards clearly was not a problem for Sears.
Reassurances from the 1940 Sears Modern Homes
However, the prosperity depended only on these few basic industries, thus, the lack of diversification in the American economy remained a great weakness, as it made the Great Depression inevitable. The expenditures on construction fell from $11 billion in 1926 to under $9 billion in 1929, and automobile sales fell by more than a third in the first nine months of 1929. Therefore, when these overinvested industries began to decline in the late 1920s, newer industries such as chemicals, electronics, petroleum, and plastic began to emerge to replace the automobile and the construction industries.
Likewise, Andra C. Grant says, “Between 1929 and 1932, home prices in New York fell an average of 50% and the unemployment rate rose substantially. As a result, many residential mortgages were at serious risk of foreclosure. Lenders in the 1930s faced substantial incentives to avoid foreclosure” (Grant). Most Americans couldn’t afford to buy a home prior to this downfall. The down payment was 80% upfront, and people only had five to seven years to pay the remaining amount (“How Did the FHA Help End the Great Depression?”). However, in 1934 a reform called the Federal Housing Administration uprooted. (“How Did the FHA Help End the Great Depression?”). It helped recreate the failing housing market. It is known for lowering down payments, creating a longer loan period, and introducing the idea of paying interest over time and loan standards (“How Did the FHA Help End the Great Depression?”). Through solving the housing problems, the Federal Housing Administration helped get America back on its
In the 1930s, with the Great Depression approaching Europe, Selfridges felt the consumer confidence decreasing and eventually the recession came over. However, Harry Gordon was still being praised by his work: “He has not merely transformed Oxford Street into one of the world’s finest shopping centres, he gave a lead to the entire store trade”, wrote Drapers Record magazine (Woodhead, 2013). After thirty years of revolutionising London’s retailing, in 1939 Mr Selfridge was in deep debt to the store, which forced him to retire with the title of
Smiley, Gene. Rethinking the Great Depression. American Ways Series. Chicago: Ivan R. Dee, Publisher, 2004.
McElvaine, Robert S, ed. Down and Out in the Great Depression: Letters from the Forgotten Man. Chapel Hill: The University of North Carolina Press, 1983.
Downs has sought to dispel myths surrounding housing policy. The first myth he debunks is the myth that all government-sponsored urban policies have failed. Downs believes that although they had resulted in greater hardships for poorer neighborhoods, the policies have given great benefits to a majority of urban American families. While he does not consider these policies to be a complete success, he refuses to call them failures due to the fact that they did indeed improve the standard of living for most of urban America. Downs also calls to our attention the effect of housing policies on the number of housing units. Starting in 1950, housing policies were aimed at ending the housing shortage until focus was shifted to low income households in the midst of the Vietnam War. To Downs, ending the shortage was important because it was affecting the American way of life. Couples were delaying marriage, extended families were living in one home, and overcrowded housing led to overcrowded local facilities, such as schools. Downs also argues that this overcrowding led to an inescapable cycle of “substandard”
"The Depression, The New Deal, and World War II." African American Odyssey: (Part 1). N.p., n.d. Web. 06 Mar. 2014.
During The Great Depression, people had to find ways to save money on even the bare necessities. One example of this was the widespread use of vacant lots, and land provided bythe cities to grow food. Americans now had to live in the manner of their ancestors, making their own clothing, growing their own food, and agai...
The Great Depression was felt worldwide, some countries more than others. During this time many Americans had to live in poor conditions. In the United states, 25 percent of the workers and 37 percent of all nonfarm workers lost their job(Smiley 1). Unemployment rates had increased to a 24.9 percent during 1933(Shmoop 1). Unable to pay mortgages, many families lost their homes. The cause of this was the Stock Market crash in 1929. Many investors of the stock market panicked and sold all their stocks. The results of this include frightened Americans withdrawing all their saving causing and hoarding it in their homes many banks to shut down and less money to circulate in the economy. Although the economy had taken a dramatic blow, there was hope. A new program was administered by the government to help people suffering from the depression. The Works Progress Administration (WPA) program helped improve lives of Americans affected by the Great Depression.
It can be argued that the economic hardships of the great recession began when interest rates were lowered by the Federal Reserve. This caused a bubble in the housing market. Housing prices plummeted, home prices plummeted, then thousands of borrowers could no longer afford to pay on their loans (Koba, 2011). The bubble forced banks to give out homes loans with unreasonably high risk rates. The response of the banks caused a decline in the amount of houses purchased and “a crisis involving mortgage loans and the financial securities built on them” (McConnell, 2012 p.479). The effect on the economy was catastrophic and caused a “pandemic” of foreclosures that effected tens of thousands home owners across the U.S. (Scaliger, 2013). The debt burden eventually became unsustainable and the U.S. crisis deepened as the long-term effect on bank loans would affect not only the housing market, but also the job market.
Furthermore, a narrative of the Depression: "It was always cold in the house; the only warmth was a wood burning stove in the corner. We used to sit and listen to Gracie and Burn's on the 7 o'clock show. Dinner was watered down onion stew with a slice of bread. "We worked in the fields, maybe 9, 10, hours per day, maybe more. Pay was two dollars a week. We were lucky. We had a roof over our head and food in our bellies, even if it were onion stew, most days." Now, it's 1974 and I ask my granddaughter for a pop at the lumber yard. "50 cents for a 16 ounce bottle of pop. What's wrong with prices these days? I can remember 10 cents a pop."
The housing boom created an illusion of ever increasing home equity. It was difficult to walk away from potential homes that seemed good on the surface, but in reality were either money pits or less than desirable. For the uninitiated, making sense out of the chaos when things start to go wrong is an emotional process that lends itself to the gradual disposal of the rose-colored glasses. The upkeep and maintenance that homeownership requires of the inexperienced homeowner, particularly an older home, is comparable to taking on a new entry-level job with diminishing returns. There is a prevailing chaos amid the turmoil of a broken water pipe during a holiday weekend.
During the Great Depression, while the competitors were cutting costs and reusing outdated designs, Kress was expanding and building more elaborate stores than their previous ones. The architecture was referred to as an “emporium” evoking an elegant atmosphere more suited to a fine cloth or furniture store in New York rather than the five & dime stores dotting small town America. Many wonder what the driving force was behind these design decisions, especially during a national time of economic recession. Perhaps simply to outpace the competition, but perhaps more importantly Samuel Kress was an avid art collector and a proponent of public art enhancing a community. In this way the Kress legacy of the brand became more than a retail business, it became a symbol of small town civic pride.
Second, the rapid development of the Home centers such as The Home Depot, with prices 30% less than the traditional hardware store made Black & Decker to lose market share to Makita. As per Exhibit 2 we could notice that in the home center channel that represent 25%of the trades...
Sears began as a small retailer but as the years have gone by, they have become