"Gonsumer Attitudes": A Reflection of 1979

Bv H. A. Roberts Executive Vice President Western Wood Products Association

'T ONSIDER- attitudes" that housing market

\l 11r16 the potential economic impact of the President's recent actions to curb inflation and strengthen our weakened dollar abroad, it will be "consumer determine what the will do in 1979.

Housing starts are the end of the wood products and building supplies marketing chain and directly affect the retailer, wholesaler and distribution channels as well as the western lumber industry.

To comment on the potential affect of these recent economic measures is premature, so we'll stick with our earlier prediction of housing starts to reach 1.75 million and an adequate demand for western wood in 1979.

In recent times consumers have seen housing as one of their top hedges against inflation. To date they have been correct, as most home values have been climbing faster than the rate of inflation. People are becoming more willing to place themselves further in debt to buy a home. This trend may likely continue as long as there is a reasonable money supply.

The availability of money therefore will be a determining factor for the housing market in 1979. New "money market certificates," introduced on June l, reversed the weakness in savings gains that had prevailed since October 197'1.

According to savings and loan officials, a net new savings gain of $ I 8 billion was registered for June, $3.0 billion for July, $2.4 billion for August and $2.0 billion for September. The new instruments not only topped the runoff in savings but lifted gains in deposits back to record or near-record levels.

The worry arrives in December, when June certificates expire and investors must make the decision to reinvest or to place their money elsewhere.

Because of recent action by the Federal Reserve Board, mortgage rates are expected to rise. Should the climb in value of housing slow, potential homebuyers may delay purchase since investment in housing becomes less attractive or no longer works as a hedge.

Additionally, should the inflow to the savings and loan slow, there is a strong secondary mortgage market in the Federal National Mortgage Association (Fanny Mae) and the Government National Mortgage Association (Ginny Mae).

In addition to the 1.75 million conventional units we expect to be built in l979,an additional 270,000 mobile homes will also be built. Multi-family activity is expected to do comparatively better than in the recent past because of the high percentage of subsidized rental units started under HUD authorization.

Lumber

Demand for softwood lumber should total about 39.3 billion board feet, a 3olo drop from 1978. The drop in demand is reflective of the anticipated slowdown of the economy. A bright spot in lumber demand is repair and remodeling for both residential and non-residential construction. This market has been strong for the past three years and the higher costs for new construction assure continued strength. o The inventory of housing has remained relatively steady at six months without the great oversupply which existed in 1973 such as the condominiums in Florida and overbuilding in some areas such as Cali[ornia. o Money is much more available through the new six-month cer(Please turn to page 16)

The state of our industry appears relatively strong, but not without threat.

RARE II, the Forest Service's study of roadless lands in the National Forest system, is continuing and will be brought before Congress early in 1979. Over 62 million acres could become Federal Wilderness and thus be closed to timber harvest.

Public input requested by the USFS indicates a positive support for the multiple-use concept, including timber harvesting and recreation, and a negative reaction for committing the resources to a lock-up in Federal Wilderness.

Congress must respond to this input and act in a reasonable manner to help ensure that this nation's demand for wood and wood fiber can be met in the future.

Very important, major factors leading to the housing downturn of 1974 and 1975 do not exist today.