The construction industry held up well last year, defying predictions, but the party could be over when housing starts decline in 1997.
Housing starts hit 1.46 million in 1996, an 8.1 percent increase over 1.35 million starts in 1995, according to the National Association of Home Builders. That is twice the growth rate NAHB gurus had predicted.
The growth, fueled mostly by a strong first-half performance, came despite rising long-term interest rates, David Seiders, NAHB's chief economist, said at an Oct. 30 construction forecast conference.
However, Seiders thinks housing starts will decline 7.4 percent in 1997 — falling back again to their 1995 level. Starts should hold steady at the 1.35 million rate in 1998.
Seiders said U.S. economic growth will slow this year to an annual pace of about 2 percent, posing little inflationary threat.
Seiders said housing should decline ``a couple more quarters'' before ``stabilizing at a level that is really quite good'' — in other words, just what the Federal Reserve Board wants to hear. But several other economists at the NAHB conference predicted a bit stronger economic growth, and Fed moves to hike interest rates.
New home and remodeling are key markets for plastic building products, especially vinyl siding, pipe and windows, and sinks and showers made of acrylic and other resins. Home owners also buy appliances.
According to Washington-based NAHB, each 2,085-square-foot home requires 2,325 square feet of exterior siding, 3,061 square feet of insulation, 15 windows, five exterior doors — all potential plastic products.
Through October 1996, the amount of PVC resin used in three major construction products grew by double digits, according to the Washington-based Society of the Plastics Industry Inc. Siding and mobile home skirting jumped by 18.6 percent. Pipe and tubing grew 16.6 percent. Extruded window and door profiles climbed 11.8 percent.
NAHB will announce detailed projections at the Builders' Show in Houston, to be held Jan. 24-27.
Rising lumber prices — which can help plastics gain market share from wood — will be a hot topic this year in Houston. Lumber markets have been calm for a few years, but the lid was taken off in May when the United States and Canada signed a five-year agreement that limits Canadian lumber exports to U.S. builders.
Lumber prices have soared 36 percent, to $480 per 1,000 board feet for framing lumber. That is enough to jack up the price of a new house by nearly $10,000, ac~cording to the association, which has called on the Clinton administration to change the deal.
Companies that supply the manufactured home business have been busy. Through October, shipments of factory-built homes hit 312,529 homes, up 9.3 percent through the same period a year earlier, according to the Manufactured Housing Institute in Arlington, Va. The one-month total for October — 35,865 — was the largest monthly shipment since June 1974.
While new-home building should slow this year, nonresidential construction should rebound, according to McGraw-Hill's F.W. Dodge division. Leading the growth should be industrial building, which declined 10 percent in 1996. Institutional building also will increase, led by school construction, F.W. Dodge said. Commercial construction, which includes office buildings and hotels, also is expected to have a strong year.
In government infrastructure spending, PVC pipe extruders should get a shot in the arm from the revised Safe Drinking Water Act, signed by President Clinton last summer.