Redwood big in R&R

By Tom Ingham President Simpson Timber Co.

A FTER an improved 1988, general market activity in F redwood is expected to be slightly offin 1989. While dramatic shifts in interest rates are not foreseen. slowlv rising rates will likely influence new home construction, with as much as al20/o decline in new home starts.

On the positive side, however, one of redwood's biggest markets, home repair and remodeling, should experience the same strong demand next year. According to the Census Bureau, Americans spent $37.3 billion on alterations and improvements on single family homes in 1987. In fact, homeowners spent a third as much fixing up existing homes as building new onesa trend which augurs well for redwood, a mainstay of the do-it-yourself market.

Given redwood's high performance standards, and, to a lesser degree the public's concern over toxics, homeowners and contractors are likely to look at redwood as an increasingly viable alternative to treated wood for deck construction. As a result, we expect to see growth in demand for redwood decking products outside of the

No doom-&-gloom

By Robert C. Doran Director, Marketing Research & Planning Gold Bond Building Products

T Ug HOUSING market is not a doom-and-gloom I forecast for 1989, but overall production will be less than expected.

Housing starts that reached 1.8 million in 1986 and 1.6 million in 1987 are now in the 1.4 to 1.5 million range in 1988. Several factors are contributors:

(1) Higher fixed and variable mortgage rates. Fixed rates were at 10.50/o at mid-year, and by comparing the l2-month averages, fixed rate mortgages were 34 basis points higher in 1988 than in 1987.

(2) The higher inventory of existing and new homes over last year. Since last year, existing home sales have fallen 6.9% and new home sales have declined 6.40/0. lt is very likely the downturn in sales has negatively affected housing starts.

Story at a Glance

Single family starts will outpace multis higher fixed and variable interest rates home ownership rates decline.. single family homes get bigger, use more material.

traditional Western markets, specifically in the Midwest and East.

The development in the coming year of structural ratings for appearance grades of redwood could also strengthen demand. Adoption of such standards would broaden the market base considerably and allow us to compete more effectively with existing structural grades of other species.

Over the past year, Simpson has also made substantial improvements in tight knot siding products. Coupled with price and availability, these changes should positively influence specification and use across the country. For other air seasoned/P.K.D. common grades, tighter grading, improved yardability and product appearance will add to overall popularity and customer acceptance in '89.

Story at a Glance

Redwood hot in $37.3 billion remodeling market. moregrowth in decking . . newstructural ratings will accelerate demand.

We remain concerned about increasing environmental pressure to restrict or halt old growth redwood harvesting in California. Legal challenges and regulatory bottlenecks may result in reduced product availability and increased cost over the long term.

(3) Multi-family starts are likely to be low in the foreseeable future due to overbuilding in some regions and the impact of tax reform.

All regions are showing declines in permit activity this year. Permits in the second quarter of 1988 suggest that the Midwest and West are still fairly strong but that the Northeast may be showing some weakness.

Single family activity, driven by trade-up demand, continues to remain stronger than multi-family. Multifamily starts rose l2o/o at mid-year, but permits fell by an equal percentage.

Home ownership rates remain fairly constant at the national level, but vary considerably by region, age, income and family composition. Among young households, the home ownership rate has declined steadily since 1980. In the second quarter of 1988, the overall ownership rate remainedat63.70/0, the lowest rate in two years.

The median size of single family homes is increasing, up from 1,680 square feet in 1986 to 1,755 square feet in 1987. In addition, the number of bathrooms, bedrooms and amenities per house continues to increase.

Despite the trend toward increased amenities, use of brick as an exterior siding has been declining. Vinyl siding has become the exterior siding of choice and has doubled its share of the exterior market in all regions except the West, where stucco remains most popular.

Gypsum wallboard continues to remain the most specified interior finish material in new single family homes with 930/o of the total wall area finished with gypsum wallboard. Six percent of all interior wall area is covered with plaster-coated gypsum wallboard. Eighty nine percent of all gypsum wallboard used is 7/2" thick.

Total new residential construction demand for gypsum board is expected to be 8.92 billion square feet in l 989.