Timber exec, citing pent-up demand, is bullish on '82 housing starts
William Haselton, chairman of the St. Regis Paper Company, doesn't consider himself an optimistic person. ''I tell my own board that sometimes when they think I'm being pessimistic, it's only because we're realistic,'' he says.
But Mr. Haselton is feeling optimistic about the housing industry in 1982.
In Boston, speaking to a group of security analysts in mid-December, and again in an interview last week, Mr. Haselton predicted that housing starts would jump 20 percent this year over the severely depressed level of 1981. This would mean 1.3 to 1.35 million new units would be built.
By way of contrast, the Citibank Economic Forecasting Service is predicting that new housing starts will total 1.225 million units -- down from an earlier prediction of 1.65 million. The Value Line Investment Survey is forecasting 1.2 million new units.
Mr. Haselton believes the housing industry will bounce back in 1982 because of pent-up demand. ''People are living on a doubled-up basis for one reason or another with their families or one another,'' he states. ''The one thing I think you can say demographically is that the market for housing is there.''
Exactly what form that housing will take is another matter, Mr. Haselton concedes, noting it may be small condominiums or apartments as opposed to single-family units.
He says the main reasons people aren't buying are interest rates and uncertainty over the economy. He believes that the economy will turn around next year, however, and that as people become confident they will start looking at housing again.
If the economy does turn around, won't interest rates go back up, as Henry Kaufman, an economist with Salomon Brothers, forecasts?
Haselton answers, ''I believe the majority on Wall Street believes the interest rates will go down slightly more -- another percent or two between now and next spring, and then basically stay close to those levels.''
Even if interest rates come down, will savings institutions be able to make loans?
''The savings-and-loan situation is not good,'' Haselton admits. But he adds: ''The money for mortgages must come from another source, and I'm inclined to bet on the conception that if there is a need it will be served. . . . I don't pretend to explain how it will happen, but this is a feeling I've got from talking to a lot of bankers.''
One possible source for new mortgage funds, he says, may be union pension funds -- it's now possible for them to invest in long-term mortgages. ''I don't understand all the fine points of it,'' he says, ''but it will provide a very large fund of money that can go into longer-term mortgages. And these (union pension fund managers) have a vested interest in providing jobs. So their heart's in the right place and I believe this is a positive aspect.''
When the housing market does recover, Haselton doesn't expect it to be the same as it used to be. For example, houses will probably shrink in size. ''In my opinion the average size of the house start in square feet is starting down. People are going to find that the home of their dreams is going to have fewer square feet in it.'' Naturally, this means that fewer board feet of lumber will be used in each house. ''We may get back to 1.8 million housing starts,'' Haselton says, ''but the demand for lumber will be equal to 1.7 million housing starts, which isn't that bad, either.''
To be in line with what it perceives will be a smaller market, St. Regis, a diversified forest products company, has decided not to expand its business in 2 -by-4s, which are mainly used in the housing market.
The company does plan to expand its Southern sawmill operations in hopes of increasing its export lumber business. This is a particularly good time to buy sawmills, Haselton notes, since they can be bought fairly cheaply because of the slack demand for lumber. In fact, according to a recent study by Forbes magazine , only 50 percent of the sawmills are now in operation.
By expanding sawmill operations, St. Regis hopes to get more value for logs it harvests from its properties which previously were not used in its own manufacturing. ''You get a chance to merchandise your timber for a higher use,'' he explains. Also, the sawmills produce chips which are used to make paper, so the company will use more of its own supplies and less of those obtained independently. St. Regis is now negotiating to buy a mill.
Haselton maintains that St. Regis's earnings have not been hurt as much by the economic recession and housing downturn as some of his competition's earnings have been. ''We think we foresaw this downturn before others,'' he says , explaining the company had more time to plan for it.
Moreover, some of its paper products, such as lightweight coated paper used by Time and Newsweek magazines, have held up well. And in the future, he says, with the company's strategy of locating most of its operations in the Sunbelt, it will be near its growth markets and away from its major competition -- the Canadians.
Housing sales, as well as housing starts, should start to recoup in 1982. That's the opinion of Joe F. Hanauer, senior vice-president at Coldwell Banker, a real estate subsidiary of Sears, Roebuck. According to Mr. Hanauer, housing sales will increase 15 percent in 1982, while mortgage rates will drop to 14 or 15 percent from the 17-to-18 percent level of recent months. And after a period of declining prices this past year, housing prices will rise 6 to 8 percent, he predicts.