Reasons Behind The'78 Decline

By Gil Oswald President Simpson Timber Co. Seattle, Wa.

I IAPPY New I lYear!

1978 is forecasted to be a good year for the building materials industry. Only slightly down from the excelent construction activity level of 1977.

With 1977 U.S. new housing starts expected to be in excess of 1.9 million, all .segments of the building materials industry, from manufacturers to retail dealers, have enjoyed a year of strong market demand.

In fact, 1917 wtll be the fourth best year on record and best since 2.057.000 starts in 1973.

Of particular importance to the wood products industry is the fact that single family residences in 19'77 comprised a fal 68.5% of the total. That, of course, means better markets for wood products per unit.

The National Association of Homebuilders is projecting 1.7 million starts. Flanking their estimate are 1.65 million by the Western Wood Products Assn. and 1.75 by the American Plywood Assn.

Again, it looks as if single family residences will form about two-thirds of the total.

In California, we look for a sharper decline in starts than we do nationally. There should be about 248,000 starts

Story at a Glance

General outlook: continuation of 77 levels in 1st part of '78 with a slide in later months . political actions by President Carter, especially in energy legislation, could have a major impact.

The Merchant Magazine in l9l7 and about 202,000 in 1978, an 18/o d1op.

The general outlook is for continuation of 1977 levels in the first part of 1978 with a slide in the later months.

Among the factors contributing toward the predicted decline are these:

( I ) Less construction and mortgage money available as interest rates rise.

(2) Higher cost of homes will finally slow sales.

(3) There are fewer building lots available in urban areas.

(4) Potential buyers will resist moving further from work.

(5) Subsidized housing will not accelerate appreciably.

Hanging over all predictions are the outcome of major proposals by the Carter Administration and Congressional action on them. The final shape of energy legislation will affect every American personally and professionally. The'Administration's specifics on tax reform are expected to emerge next year and could have an impact on the economy generally and homebuilding specifically.