Vigorous home improvement demand

EMAND for building products will continue to expand in 1984 on the strength of a vigorously grow- ing home improvement market, a further, though small, increase in new home building and an accelerating pace of commercial remodeling activity.

In the home improvement market, all the key elements of demand are and will remain in place to support solid sales gains in the year ahead. First, higher levels of employment, a longer workweek and moderately increased compensation will combine to lift total wage and salary payments some l09o above this year's level. Of course, not all that increase will represent additional "real" purchasing power, as consumer prices rise by some 590. But the remaining 590 real income improvement that is expected is a lot more robust than that which has been realized in recent years.

At the same time, household balance sheets are in good shape as asset values (homes and common stocks) have risen faster than liabilities. Moreover, the debt servicing burden of households is lighter than it has been in more than a decade. Finally, account must also be taken of the personal income tax refunds that will again be forthcoming as a consequence of over-withholding in 1983.

On the new housing front in 1984, very little year-to-year change is expected in the average level of mortgage interest rates, although a modest decline may take place in the first six months. While interest rates will remain high enough to forestall a hous-

Bv A. G. Matamoros Vice President & Chief Economist Armstrong World lndustries, Inc.

Story at a Glance

More increase in demand for building products in '84. small gains in home building . . morc commercial rcmodel. ing actiYaty. . morc dispos. able income will fuel increased buying activity by the public.

ing boom, money availability is ample and basic demand strong enough to support at least some small improvement in sales of both new and existing houses, as well as housing starts.

"Main street" commercial remodeling, espocially sensitive to interest rate levels and retail profitability, should benefit from stability in the former and marked improvement in the latter. At the same time, the overbuilding of new office space in many areas is prompting owners of older structures to modernize or see their vasmcy rate rise and their rents fall.

All in all, when 1983 and l9&4 are history, building product sales will have recorded solid back-to-back advances for the first time since 1978-1979.