Building Material Lumber 1978 Sales Outlook

by Dr. A. G. Matamoros Vice presidcnt and Chief econolrrist Armstrong Cork Co.

activity to lalter during tlie dark days <f 1974 and 1975 and the substantial advance registered during the past two years constitute powcrfui evidence of the high priority that Americans accord their houses.

Uulaing will nrore4..il1 than offsetamod- .b l esl ueclne rn '-] housing starls in 1978.

Looking ntore closely at each of the three major markets, home improvement stands out as both more stable during recessions and lnore rapidly growing during recoveries than the other two.

The f-ailure of home imoroventent

Story at a Glance

More home improvement activity . rising volume of light commercial building . . . modest decline in single family housing starts with about an equal increase in the number of multi-familV starts "average performer in building materials should hit 10%12% dollar volume gain in '78.

And for the very good reason that a sound house in a stable neighborhood has represented the best investment around. Comparc the rate of annual increase in the price of cxisting housing since 1968, 8.6%, with an actuiil decline in the price of the 500 conrmon stocks in the Standard and Poor's average over the same period.

Further support for the horne improvement market has derived front the surging sales of existing houses. Last year, sales of older houses jumped more than 2U/" to ovcr 3 million units, and much the same kind of advance is under way this year. While tightening mortgage market conditions ntay hold the gain in sales of existing houses in 1978 to aboul 10%, the backlog of pent-up demlnd lbr lrome irrrprovement materials needed to spruce up some l0 million older units that changed hands in a three-year period will be substantial, to say the least.

Denrand for single-family housing is also btllstered by the growing num| ftleose turn to poge 163 t

by H. A. ROBERTS I.recu tivc Vicc Prcsidcnt \Vcstcrn Wood Products Association

A S WE move htoward year's end. it appears that l9l1 housing starts will reach 1.9 nrillion, the second best housing year since 1973. Nearly three-quarters of thcse new housing units have been in the single-fanrilysector, niaking 1977 the largcst single-family housing year in recent history. This. coupled with the lhot that single-fanrily units requlre nearly twice the volume of lumber used in multi-family housing, has made I977 a hectic year fbr Western lurnbermen and a frustrating one lbr rnany of our custorners.

The rcsidential rnarket in l9l7 should account tbr rnore than 45% ol'total U.S. lumber consumption.

Story at aGlance

Total U.S. lumber consumotion to decline slightly probable shrinkage in mortgage funds Western lumber production & shipments down about 5.3% a qooo year, parallel to '76.

the highest ratio since 1973.

Because of this incredibly high level of demand, lumber shipments from the Coast and Inland regions, exclusive of the redwood region, should total nearly 18.9 billion board feet.

Production for these same two regions will slightly exceed 1977 shipments. Because of this, lumber inventories are not expected to change more than | - 2% from the 1976 year-end level of 2.2 billion board feet. In recent years, Western lumber inventories have remained relatively consistent, varying little more than 200 million feet from year to year. Year-end inventories should fall just short of 2.3 billion board feet.

Looking ahead to 1978, we expect total U. S. lumber consumption to decline slightly from 39.7 billion board feet to 37.6 billion board feet, with a proportionate, though slight, decline in demand for Western lumber.

One possible cloud on the 1978 horizon is the probable shrinkage in mortgage funds, which will tend to dampen the housing market in 1978, particularly the second half. Because lumber demand is extremely sensitive to changes in the housing market, we expect Western lumber production and shipments to decline about 5.3% to 17.9 billion b.f. This decline would be even greater were it not for an anticipated improvement in non-residdential construction, repair and remodeling. Nonetheless, we expect 1978 to be a good year, slightly lower than 1977 , but paralleling 1976 levels.

Unfortunately, timber supply is expected to continue to be constricted in the West, as a result of federal legislation to set aside more and more acreage in the National Wilderness System, where timber harvesting and economic use of all resources is prohibited.

The forest products industry is pushing insistently for resolution of the federal timber supply issue as it relates to Wilderness System extension. The American public has a right to know whether 100, 200 or 300 million acres of its lands will be closed forever to roads, recreational activities and as a timber resource.

We are hopeful that this issue can be resolved quickly and that American home buyers can count on an adequate supply of wood hber at reasonable prices to satisfy housing needs.

llfHAT more UU can be expected of a New Year which has been preceded by 24-30 months of unprecedented building material activity in most of the country?