Forest Products Price Factors

Harold E. Sand Executive Vice President Georgia-Pacific Corp.

THE annual I guesslng game on next year's housing starts, a major key to the coming building ma" terial market, indicates improvement is more cerr -

.._I taln tnan rt nas been manv trmes past. Our own studies confirm this with conventional starts expected to total somewhere between 1.6 million and 1.7 million.

Much depends on the growth in real Gross National Product (GNP). We are peggrng that at between 4%5%, which would mean continuing inflow of lending funds to the s&l's with lending rates down slightly from 1976 fall levels, then plateauing for the major part of the 1977 building season before moving up to some extent. This will be reflected in a substantial increase for multiples with single-family starts holding near their 197 6 near -r ecord levels.

The probable increase in manufactured home shipments to over 300,000, possibly 350,000, is somewhat misleading because there will be a much greater increase in the percentage of doubles (counted as one unit) with their substantially larger volume of building materials because of higher construction standards as well as size.

A good increase in home remodeling, conservatively at least $33 billion and leaning heavily toward major additions requiring substantial use of plywood, lumber, gypsum drywall and other building materials, also adds considerably to what should be an excellent building materials market in 1977.

,All this would bring upward pressure on prices, particularly on the supply"demand controlled lumber and plywood markets which are always the most volatile, both up and down.

However, it now appears the biggest factor in forest product prices will be cost-push because of the high price collected by the federal government for its timber as a result of huge volumes of ripe timber held off the

Story at a Glance

Strong business plus federal government restrictions in the supply of forest products will create cost-push situation good increase in home remodeling, at least $33 billion.

market. This creates an artificial shortage that has been reflected in highgr tax appraisals on privatelygrown timber.

The cost-push factor becomes even more of a factor as starts approach I .5 million, the point where additional supplies come largely from the Far West where the federal government controls up to 75% of all the commercial-type timber available. This is the year the non-timber-owning segment of the industry, which is most of the industry irt the Westr must rely heavily on this over-priced federal stumpage purchased in the past three or four years, much of it at several times appraised value.

This will be directly reflected in higher costs to manufacturers, wholesalers, retailers, builders and home buvers.