An in-depth, comprehensive study of trends and problems in housing

Ttr-OME building, as is generally recogrr nized. has been more adverselv affected by the pressures of the war in Viet Nam than has any other major economic activity. Not only have military inductions disturbed the normal cycle of family formations, but even more strikingly mortgage financing has been sharply curtailed by the credit squeeze and run-up in interest rates that emerged in the economy after escalation started in Viet Nam. Last year housing starts declined to the lowest level in almost a decade. While a fairly pronounced rebound is now under way, reflecting the respite late last year and early this year from ,extreme credit tautness, it is difficult to foresee really pronounced strength in the housing field any time soon, particularly in view of reports that savings institutions-despite an enlarged inflow of fundsare still somewhat reluctant to make advance commitments to buy mortgages. Moderate continuing improvement for the remainder of this year is probably the most that can reasonably be hoped for.

Long Term Look

For the longer term, however, the outlook is considerably brighter. Principally because of population factors, economists generally agree that the potential is developing for a marked home'building upsurge in the United States in the late I960's and the early l970's-one that would have far-reaching efiects, direct and indirect, on the volume and composition of over-all economic activity, In its size and duration, the coming boom is considered likely to far outshine all its predecessors of postwar years, assuming that adequate mortgage financing is available. For the first half of the 1970's, a potential would appear to exist for something like an average annual total of 2 million housing starts, a third higher than the starts figure in the first half of the I960's.

This projection inevitably must be couched in the conditional, of course, in part because the financing challenge is enorrnous (suggesting a possible need for major efiorts to improve the liquidity of thrift institutions and the marketability oI mortgages) and in part because the arithmetic of housing demand is imprecise in a variety of particulars. Underlying the fore-

Our thanks to Milnn W. Hudson, ed,inr, Morgan Guaranty Survey, Morgan Guaranty Trust Co., Neut York, lor his kind permissian ta reprint this excellent article. -Editor.

Sfory of q Glonce

A really detailed explanation that presents the background You'll need to understand this vital segment of the economY.

cast is an estimate not only of the demand for housing that will flo* from household formations and from the demolition of existing structures ,but also difficult calcu' lations that involve assessment of such things as the trend toward ownership of more than one dwelling by families and the increasing popularity of mobile homes'

A bulge in the formation of new households--the largest individual source of demand-is a certainty for the years ahead, reflecting the growth into adulthood of the large number of babies that were born after World War II. For at least a few more years, however, it is likely to be especially difficult to gauge probable marriage rates for this age group with precision because of the so-called marriage squeeze, a shorthand term for the fact that in the next few years girls of marriagea,ble age will significantly outnumber men. This imbalance will arise because on the average women marry three years or so younger than men. Thus, while approximately equal numbers of boys and girls were born each year in the late 1940's and early 1950's, the girls in many instances may have to wait some time before finding suitable marriage partners.

THE WAITING GAME

The waiting game may be extended furthermore, both by the increasing tendency of young men to prolong their education and by the uncertain duration of young men's military service occasioned by the war in Viet Nam. W'ith delayed marriage emerging as a likely pattern, it seems probable that the young will accentuate the trend of recent years for widows, divorced

Weslern Lurnbcr & Buildlng Mqterlolr ilEtCHANT persons, and other single people of all ages to maintain their own households. And rising standards of affiuence in the economy tend to facilitate the establishment and maintenance of separate households.

Making alternative assumptions about the efiects of the o'marriage squeeze" on the coming generation of householders, the Census Bureau a few months ago published high and low estimates of household formation in the years ahead. Given the di{ficulties of choice between the extremes, many analysts think it safest to average the high and low proj,ections. This procedure suggests that household formations will increase from an annual average of 890,000 in the first half of the 60's to an average of 1,052,000 a year in the 1966-70 period, and 1,250,000 a year in l97I-75..

In the ten years from 1966 to 1975, according to this averaging procedure, the num'ber of family households will have risen from 48 million to 56.6 million, an increase of ITVo; the number of individuals maintaining their own residences, from 9.9 million to I2.5 million, a rise oI 26/o. Total households, the sum of the two, will have risen l9/o.

Besides the prod to home building emanating from household formation, replacement demand also will be rising. It is normal, of oourse, for hundreds of thousands of houses and apartments to disappear from the nation's housing inventory each year. They may be demolish,ed to make room for highway or urban-renewal construction, converted to other uses such as stores, or destroyed in disasters such as fires or floods. Since there is no regular count of o'removals," however, information on their number has been fragmentary and past estimates therefore have been based in large part on guesswork.

Less Guessing

Some of the guessing-but by no means all-was taken out of removal estimates with completion last year of the most comprehensive study of the subject to date Prepared by the National Association of Home Builders, the study undertook a cross check of such demolition records as are available-e.g., those contained in the housing programs of 3,000 cities filed with the Department of Housing and Urban Development and the Federal Housing Administration's studies of housine markets in 100 cities. The Association bel]eves that, although some of the records consulted were less accurate than others. it has substantiated an estimate that annual r.emovals attributable solely to demolitions were equivalent to almost .5/o oI housing stock in the first half of the 60's. It projects the figure to rise to a Iull .5/o in the first half of the 70's.

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Lumber and millwork from California's f-l- I

rI T-t' f\ tabulous !'eather River Llountry.

Feather River Scenes: Melting Spring snow swells the North Fork of the Feather River at a point near Indian Falls, twenty one miles northwestof the Feather River Lumber Co. sawmill in Sloat, California- The Feather River, named "Rio de Las Plumas" by Spanish explorer, Captain Luis Arguello in 18L7, winds its way on three separate "forksi' through California's Plumas National Forest. Annual softwood timber production in the forest exceeds two-hundred million board feet. lt is the prime source 6t Nikt<et Lumber.

Suppliers ol "Feather Solt Pine" and "Silver Feather White Fir"