Upbeat attitude will win

By H. P. (Hank) Sandstrom Vice President and Ceneral Manager Simpson Redwood Company

flu* REDwooD operations

Not too many years ago thar many are heading into what appears starts was considered a pretty fair to be a down-tick 1986 market with a market for industrv. That's not so anymoredue to dramatic increases in capacity and equally dramatic shifts in where the lumber is coming from.

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As reported earlier. our company is investing $13 million to upgrade its Korbel sawmill into one of the most ef f icient and productive in the industry. This, in addition to $15.7 million already spent at Korbel since 1979, represents a lot of management confidence in the future of our redwood part of the North American lumber industry.

And that industry has its problems in the marketplace where 1986 looks almost like a rerun of 1985. Housing starts for 1985 are now projected at an annualized 1.7 million. For 1986 they are projected at 1.65 million with a slow first half.

In 1970 U.S. and Canadian mills produced 38.343 billion board feet of lumber. In 1984 that volume reached 52.742 billion board feet with much of the production coming on stream

Story at a Glance

during the housing heydays of the late 1970s.

Today, supply capacity significantly outstrips market demand.

U.S. lumber producers have felt a further impact from the shift in supply sources. Canadian lumber which shared 30.790 of the North American production during a 1970-1974 five year period jumped to 40.30/o during a similar period ending in 1984.

Despite these factors the outlook is not all that gloomy for those willing to work for it and our marketing team looks to the future with confidence.

The answer, they say, lies in aggressive, creative programs to recapture some of the markets lost to substitute products, treated pine decking and importsall backed by an efficient and cost-effective manufacturing system.

That's the name of the game.

He who produces the best product at the least cost will take the winner's cup.

YouCan TellWhen The Product ls Just Right!

Forest Fiber is as careful in developing its siding products as homeowners and builders are in selecting home sites. We work until the product is just right, which in the case of Forestex 5-16 is an additional four inches in a piece of siding. A third more means faster installation and less material waste. Only one additional nail required at each stud.

Forestex 5-16 also has the beauty and economy of our other sidings: the selfaligning features which speeds installation, the traditional look of lap siding in a smooth finish or a roughsawn cedar finish, and the durability of quality hardboard. lt withstands normal hammer blows and will not delaminate, check, crack or split, when properly installed.

Homebuilding Strong In'86

Supported by stable interest rates, a rise in 1986 residential building will sustain next year's construction market at a record level, says George A. Christie, vice president and chief economist of McGraw-Hill Information Systems Co.

He forecasts 1986 construction contracting will rise 2v/o to reach a record $226.1 billion. He points out that "Next year's favorable interest rate prospects should give an edge to homebuilding over commercial and industrial construction which will be handicapped by a sluggish economy and the probability of tax reform."

"Since 1983, housing starts have settled into a remarkably steady groove at close to I .75 million units per year," Christie indicated. "And there's a very good chance that this three-year stretch of strong housing activity will go to four in 1986." He said that the forces that dominated the housing market during the first half of the 1980svolatile interest rates and complex tax sheltersare receding. In their wake the basic, underlying determinants of the demand for shelter, such as demographics, public programs, affordability and regionality, will begin to reassert their influence.

"Home ownership in 1985 is more affordable than at any time since this decade began. With interest rates steady or lower in 1986, it can be expected that new housing will be slightly more affordable next yeil," Christie pointed out. "As this trend continues, the housing industry can expect to realize a larger proportion of the potential implied by the market's demographics." Christie expects that total residential building will top $l12.6 billion in 1986, upTu/o over this year's anticipated level.

Regionally, the west will post the strongest gain in contracting value next year, rising 490. In the south, construction will grow a modest l9o, with the northeast and north central states showing 2 and 3s/o gains, respectively.

Housing Outlook Favorable

Climbing down from peak levels earlier this year and in 1984, housing activity nevertheless will remain surprisingly buoyant during 1986, according to panelists at a forecast conference sponsored by the National Association of Home Builders and the

National Council of the Housing industry.

Analysts at the conference were unanimous in their predictions of a relatively stable economy during the next 12 to 18 months and noted that the current recovery has demonstrated exceptional staying power despite prognostications of doom and gloom stemming from the nation's towering federal deficits.

The forecasters also agreed that the Federal Reserve Board has embarked upon a more accommodative course that eventually could make some sacrifices on the inflation front for the sake of monetizing the deficits and keeping economies afloat both at home and abroad.

Conference panelists predicted only a mild downturn in housing production next year. Housing starts during 1985 are expected to total more than 1.7 million units.