1.45 million 1990 housing starts

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

? HE GENERAL economY has I been slowing down since earlY 1989. The predicted "soft landing" may have already arrived with the result that housing starts declined in 1989 and shouldremain low throughout the first half of 1990 before improving in the second half of the year.This "soft landing" sug- ffi geststhere will be some reduction in market interest rates into 1990. Fixed rate home mortgages should drift down to about l0% by early 1990. Housing starts will probably total just above 1.4 million in 1989, and 1990 should be about 1.45 million starts with the strength not coming until the second half of the year.

Single family starts appear to have plateaued at approximately one million units and will probably remain at that level through 1990. However, multifamily still remains depressed due to the effects of tax reform and overbuilding in some areas of the country, but rental vacancy rates began declining in 1989. It is diflicult to see multifamily starts much above 375,000 units in 1990.

Regionally, 1990 maY be much the same as 1989. One of the weaker areas of the country is the Northeast, where very high home Prices, coupled with a slowdown in the financial services, comPuter and defense high technology sectors of their economy, have created affordability problems. On the other hand, the Midwest and Southeast regions may remain relativelY strong in 1990. The West should also hold strong, although continued "environmental" and "no-growth" issues in this section of the country may become a concern. The South Central area, the oil Patch states, may have finally bottomed out. but any recovery is expected to be quite gradual.

The size of new homes continues to increase as well as both the amenities and the price. The median square footage for single fu1r1t-!Y homes has risen steadily since 1982 and in 1988 reached an all time high of 1,810 square feet. In 1988, the median square footage of multifamily units was 940.

Story at a Glance

Housing starts will reach 1.45 million with second half strong single tamily starts 1 million, larger more expensive homes.

In 1988. the median single familY new home price increased7.70/o over 1987 to $112,500 and continues to increase in 1989. On a square foot basis, the Northeast continues to be the highest priced region for residential construction, while the South is the lowest.

Also in 1988, 420/o of the homes completed had 2-l /2 baths compar-ed to only 280/o in 1984. More than 250/o of new homes are being built with four or more bedrooms.

Wood products were selected as the exterior wall cladding material in 420/o of the homes in 1988. Brick, which had a reported 32% market share as late as 1982, was used on only l7o/o of the homes in 1988 with vinyl siding taking much of the share away from brick.

In bottr single and multifamilY homes, gypsum board continues to dominate as the interior finish material with about 94% of the total wall area finished with gYPSum board. Gypsum board coated with a thin coat ofplaster accounted for about 35% of the total wall area. In single family homes, 8l% of the gYPsum board is l/2" thick while in multifamily, 530/o of the gypsum boa(-i9 l/2"'with the remaining 470/o 5/8" thick. Gypsum board used in new residential construction will account for about l0 billion square feet in 1990, slightly above 1989 due Primarily to the small imProvement forecasted in housing starts.