Modest increase for housing

ny William Baugh \l'illiam E. Baugh & Associates

NIY ATTEMPT to forecast the over-all housing market in the year ahead in this era of enormous government deficits and other factors becomes more and more complex and difficult to assess.

Whereas in the past deficits which require governmental borrowing caused money rates to increase, we have observed an inverse effect resulting in rate reductions, no doubt due to the amount of foreign investment in our economy.

New housing construction which accounts for the largest segment of wood products usage is and always will be interest rate sensitive. Adding to the confusion is our apparent intent to devalue the dollar.

The threat of a falling dollar and its impact on housing would have serious influence on the lumber market as foreign investment by way of disintermediation finds other havens of investment opportunity. This potential problem in conjunction with a federal budget deficit will have a detrimental

Story at a Glance

Ample funds for mortgage market with tighter credit...short cy. cles of price fluctuation...over. production ol wood products still a problem...devalued dollar could create export opportun. ities.

influence because of pressure being brought to bear on interest rates.

For the present, ample funds are available for the mortgage market and we are seeing more advertising in the media for lenders wanting to initiate housing loans. Not mentioned, however, isa tightening of credit standards.

Consumer spending has been the reason for a modest economic uptrend throughout 1985. Consumer spending is outpacing income gains, driving savings rates of consumers down to new lows. The overspending caused savings as a percentage of after tax income to drop in September to the lowest point (1.990) since the government began keeping records in 1959.

With the above factors in mind, it is anticipated 1986 will only show a modest increase in housing starts over 1985 which will be in the 1,650,000 range. This can't be rated too bad when all factors are considered.

Focusing on wood products indicates the primary problem will still be in the area of over production, but, if dollar devaluation occurs, export opportunities for Western producers will increase, thereby slightly relieving over production and price pressure. The possibility of protectionist legislation on lumber imports will continue to be debated but it appears doubtful anything meaningful to affect the overall market will occur.

Continuation of short cycles of price increase and decline should continue to be with us, causing distributors to monitor and control inventories so as to minimize risk due to declining value of inventory.

The opportunities to overcome modest market growth involve diversifyrng product lines, redefining markets, cost reduction, additional personnel and capital productivity, and increased attention to the core activity of anybusiness which is marketing and is synonymous with customer awareness.

Pressure treated wood's on a roll

I N o CLASSIC cause and efr-ect

I situation, sales of pressure treated wood are increasing steadily as retailers and consumers become more knowledgeable about the product and offer a wider selection of pressure treated wood in stock and ready for delivery.

Retail sales are expected to play an increasingly important role in uut the total growth of the pressure treated wood industry, which is preparing on a national level for approximately an l89o increase in sales during 1986.

Based upon a projected production of 2.6 billion board feet of pressure treated wood whenl985 totals are tab-

By Tom Petenon Promotion Committee Chairman Westem Wood Preservers Institute

Story at a Glance

18o/o increase in pressure treated wood sales. growth of 15-No/o alone in the west acceptance of Permanent Wood Foundation increasing ... more treated lumber used in outside living areas west will lead country in sales.

ulated, the industry nationwide is gearing up for sales of 3. I billion board feet in the coming year.

This market strength reflects the continuing acceptance of pressure treated wood. In 1984, production was 2.2 billion board feet.

In 1986, growth in the l59o to20Vo range is reasonable to expect in the West. In addition to the growing retail sales of pressure treated wood to general consumers, the construction market also holds strong promise for pressure treaters. Both the Permanent Wood Foundation and general uses of fire-retardant treated lumber and plywood are expected to spearhead this sales effort.

One reason for this optimism is acceptance of the Permanent Wood Foundation, which is built entirely with pressue treated wood. This system is being promoted extensively through a joint industry effort.

Alaska is a perfect example of the growing interest in the Permanent Wood Foundation. A majority of residential dwellings in Alaska are now being built on Permanent Wood Foundations.

Another factor in the expanded use of pressure treated wood is the increased creativity being shown by builders in the highly competitive homebuilding market. Builders are demonstrating more imagination in designing livable areas outside the home. Patios, decks, gazebos and other lifestyle areas are blending the inside with the outside to increase the total usable living area.

The added value of these amenities is creating a greater awareness on the part of buyers about performance of pressure treated wood in general. This, in turn, carries over to increased retail sales.

Retailers did more promotion in support of pressure treated wood sales in 1985 than ever before. And when prospective customers came in, they were greeted by sales personnel more knowledgeable about treated wood than in the past.

Most of the credit goes to the treaters' field sales force along with industry groups such as Western Wood Products Association and American Plywood Association. They have been aggressively working with the retailers, conducting seminars on how to sell pressure treated wood: where it can be used and how to use it. An important part of this industry effort is to educate salespeople.

This effort is paying off in additional sales throughout the year. In the past, most retailers accepted the contention that sales stopped from November through February.

Now, through aggressive promotion, retailers are finding the market for pressure treated wood is a yeararound source of sales.

One particular area of strong growth is in the sales of material treated for ground contact in both 2x4 through 2xl2 lumber and 4x4 through 4xl2 timbers. In addition to sales of decking and fencing, sales of material treated for ground contact such as bulkheads and retaining walls are very strong and expected to continue to increase as retail promotions expand in 1986.

We expect the Western U.S. to outpace the rest of the country in the increased sales and use of pressure treated wood. The member companies of the Western Wood Preservers Institute are prepared for 1986 with an on-going program of aggr€ssive marketing based upon increased product awareness and user information.