A year of transition

By Ronald P. Hogan Vice President Distribution Division Ceorgia-Pacific Corp.

EOR West- l- ern building products dealers, 1983 will be a year of transition. Next year should see the beginning of a sustained recovery from our industrv's worst depression in memory. And confirmation of market trends we have seen developing the past three years.

We expect some very good housing years in the I 980s, perhaps beginning as early as next year. But we think our industry's environment has changed -permanently. Georgia-Pacific is working to help dealers service a market very different from the 1970s, a market in which commercial and industrial construction, repairs and alterations and non-residential construction will rival housing importance. And a market in which multi-family housing and smaller, attached single family homes win greater acceptance. We cannot predict when our industry will emerge from this recession. That depends on actions taken by the President, the Federal Reserve Board and the new 98th Congress. But we think chances of a sustained recovery beginning next year are better than many people think.

Story at a Glance

Lower short-term interest rates will help everybody-building products distributors, builders and financial institutions. And the July tax cut along with new savings instruments should make mortgage funds more available. Mortgage interest rates will remain higher than we would like, but they should be lower than anytime during the past two Years. The Reagan Administration's inflation fight will continue, we believe, persuading financial markets to lower the inflation premium on mortgage rates. As the cost of financing a new home closes to the key 120/o \evel, we expect a substantial housing recovery.

Nevertheless, fourth quarter Western housing starts climbed nearly ?-Os/o above last summer's pace, as interest rates moderated. Nowhere will lower home financing be more helpful than in the West, where the wood, aerospace and energy industries have been hit by recession, and where the Supreme Court's support for due-on-sale provisions has reduced alternatives to conventional home financing.

Next year we think there is an excellent chance that U.S. starts will improve to about 1.3 million, with Western building returning to l98l levels.