The 1981 Wood Products Market Outlook

By the National Forest Products Association

IIIITHOUT a doubt, the major I U factor in forecasting lumber and wood product markets in l98l is inflation.

Inflation rates are now at unfamiliar levels. We do not have enough experience with them to forecast with confidence. Other factors only add to our uncertainty. What will be the effects on mortgage fund flows of the deregulation of financial institutions now under way? Will the Federal Reserve Board back off from its efforts to control money supply growth and again focus more on interest rates? These are only a few of the questions that indicate uncertainty about the economic climate so important to wood product markets.

It now appears that many households are willing to pay l2Vo or more to gain a piece of real eslate as an inflation hedge and tax shelter. But, at these rates, affordability is a problem and many households are priced out of the market.

Affordability has always been a problem, of course. Otherwise there would be no need for housing programs for low-income households.

In the past, mortgage availability was the major cyclical problem because of the inability of mortgage lending institutions to attract passbook savings when short-term interest rates rose. But, with the growth in the use of savings certificates, passbooks have declined as the major source of funds

Story at a Glance

for savings and loan associations and the S&Ls have been able to attract funds more easily.

Now the major cyclical problem is not mortgage availability but mortgage prices because the high interest rates the S&Ls must pay to stay competitive for savings must be passed on to mortgage bonowers. This obviously makes that medium-priced house too expensive for many households.

Current high rates are not expected to sustain beyond the end of 1980. But it is unrealistic to think of mortgage interest rates dropping much below l2%o in l98l if the underlying or imbedded rate of inflation stays at 97o. Furthermore, it is unlikely the new adminisffation will be able to do much in its first year to bend the basic inflation rate downward. Fiscal and monetary policy actions that may ease the basic inflation rate could easily be offset by higher prices for food and

(Please turn to page 30)

Today, as 53 years ago, our watchword is "Quality." Since its inception our K brand hasn't changed. It presents a faithful reflection of our founding principles and a constant symbol of our present philosophy.

Operating as an independent has allowed us to hew true to these guiding principles that established early on what we were and what Kinzua is dedicated to today: A dependable supplier of guaranteed kiln-dried