Th e "if s" of recovery

By Bernard J. Tomasko Executive Vice President Wood Moulding & Millwork Producers Portland, Or.

r-EFORE we Ellook ahead to I 983, let's look back to early 1982. Remember when there were predictions of amid-summer rebound because of impending tax cuts, higher social security payments, empty pipelines, and a need to rebuild inventories? Remember when Washington said consumer spending would lead us out of the recession? Remember predictions of 1.3 to 1.5 million housing starts for 1982? I'm sure we vaguely remember some of these.

Okay, now a look at 1983 and the ingredients necessary for the longawaited recovery.

Prime Rate-The Federal Reserve and the federal deficit are the keys. Should the deficit reach the high levels predicted by some, government borrowing could send interest rates up again.

Mortgage Rates-In September of 1982 had dropped to l5-15.5q0, the lowest since May, 1981. Further declines were possible and 7690 of the major mortgage lenders were offering commitments on conventional mortgages. FHA and VA have re- duced their mortgage rates to 1290. Add to this, further declines in interest rates, the fact that over 4O million Americans will turn 30 years old during the decade and most will be seeking a first home, and everything is looking good for a recovery. Right? WRONG!

Story at a Glance

All bets tempered by factors ol employment, confidence, lower interest rates, and available mortgage money. problems exist at the mill level, with foreclosures, fi. nancing and skilled helP.

Mill level-Log decks are extremely low and many areas are closed to winter logging. Also, there are reports of unbalanced inventories with some high grade lumber already in somewhat short supply. Inventories, at most levels of the market place, are nil with hand-to-mouth purchasing being practiced. A late 1982 or early 1983 rally could create shortages and higher prices.

Empty homes (foreclosures)Homeowners trying to sell their homes and builders their inventories. Both factors remain a hurdle to a quick-paced turnaround.

Mortgages-Home buyers still want fixed rate mortgages. When the turnaround comes, will the savings & loans be prepared? Will there be other sources for mortgage money?

Builders have lost skilled people during the last three years. Layoffs have sent them to other industries from which they would probably be unwilling to return.

What then? I predict homebuilding in 1983 will be above 1982 . f unemployment is reduced and consumei confidence returns. The actual starts figure for 1982 should come in at approximately I million. 1983 will see starts at 1.3 million if interest rates continue to decline, if employment rises, if mortgage moneY is available, and the biggest if . if consumer confidence returns.

What I haven't touched on Yet is the d-i-y market and professional remodeling. These two areas will continue strong during I 983, but the d-iy market, especially, will be controll!a Uy discietionary income and "spend now" or "save and see what's going to happen" attitudes.