Housing seen helping other sectors

March 01, 1992|By Michael DuVally | Michael DuVally,Knight-Ridder News Service

WASHINGTON -- The nascent housing recovery should help buoy other sectors of the economy, but its potential impact is expected to be limited by the modest scope of the housing pickup.

Traditionally, a surge in housing activity benefits kindred industries such as building materials and big durable items needed for homes.

While private analysts and officials in trade associations expect this multiplier effect in 1992, the limited breadth of the housing recovery and the depressed level of many industries that typically profit from a housing improvement may dilute some of the impact.

"During the first year of true recovery, housing customarily represents 25 percent of the increase" in gross domestic product, said Robert Villanueva, director of forecasting at the National Association of Homebuilders.

A stronger housing market "looks like it is already hitting" some sectors of the economy, he said, citing the lumber market as an example.

Already, the expected pickup in starts is reflected in sharply higher lumber prices, a double-edged sword that benefits some in the industry, but may work to the detriment of the housing recovery by adding to the cost of building new homes, analysts said.

The run-up in lumber prices is not only a result of increased demand but also of depressed supply as a result of environmental litigation.

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