July 11, 2016

Why Did Sears Stop Selling Houses?

In this post I will re-examine another common “fact” about Sears homes that is frequently mentioned in the media, in books, and on internet sites. 

Why Did Sears Stop Selling Houses?

  • "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. "
  • "In the 1930s, during the Depression, the housing market took a sharp downturn, and by 1940, Sears stopped selling kit homes, as many people had lost their jobs and defaulted on their loans."

These two explanations are cited again and again as the reasons Sears stopped selling houses. Now 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 1942, not 1940. However, many websites and books state that the Modern Homes 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.



I made this chart using data from the United States Department of Labor statistics. It doesn't look like the residential construction market was on the decline in 1940.





In 1940, 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). Those numbers mean that sales were not stalling or "dwindling".

Sears stopped offering home financing way back in 1933. Foreclosures from a decade earlier 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 residential 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 catalog. "It's one thing to meet requirements, but it's a better thing to exceed them!" So much for the complexity.

 


These explanations for why Sears stopped selling houses are nonsense.

Why Did Sears Stop Selling Houses?
Hmm. Let me think. What was happening in 1942 that would affect the housing industry in the United States?





War preparations got underway in earnest in 1940 and the demand for lumber exploded. Lumber production increased in 1939, 1940 and 1941, but orders were in excess of output.

In 1941 the Supplies Priorities and Allocations Board issued the L-41 order curtailing ''nonessential" construction. This order meant that new residential construction was permitted only for workers in the defense industries like shipyards and tank, aircraft, and bomber plants. L-41 certainly crippled the Sears Modern Homes business.

We have some documentation to support this ruling's effect on the Sears Modern Homes business. In 1941, Sears had planned a housing development in Briarcliff Manor, NY. In October of that year, the company had to refund customer deposits because they were unable to source the lumber they needed.

 

The lead paragraph says it all. Andrew Mutch located this news article from October 1941.


Consequently, in late 1941 and early 1942, Sears mainly sold kit houses for worker housing developments in Ohio and New Jersey, among other places. 

675 S McKinley Ave., Kankakee. This is an authenticated Sears Yates built in early 1942.  Kankakee was home to the Kankakee Ordnance Works which produced TNT for the war and other chemicals. This Yates could have been classified as worker housing. Photo from Realtor site.


zzx 



In 1942, the government called the need for lumber "critical". In May of that year, the U.S. government took control of all lumber mill sales and deliveries. This would ensure that there would be an adequate supply of lumber for military purposes.

It's hard to sell houses when you can't get any lumber.

So our answer is simple: Sears stopped selling houses because of the government's regulation of resources during WWII and the national restrictions on construction materials. After the war, Sears re-entered the housing business in 1946 when they introduced Homart Homes.
















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