Family Economics Review [1979, Number 2]

              HIGHLIGHTS/SPRING 1979
ENERGY AND TEXTILES
OUTLOOK FOR FOOD
HOUSING:
OUTLOOK
FmHA RURAL PROGRAMS
IN NONMETRO AREAS
Depository
PROPERTY OF THr:
LIBRARY ·-
APR 6 1979
University of North C t·
ar· Gre 9nsboro aro 1!1.! 1
Science and Education Administration
U.S. DEPARTMENT OF AGRICULTURE
FAMILY ECONOMICS REVIEW is a quarterly
report on research relating to economic aspects
of family living. It is prepared primarily for
home economics agents and home economics
specialists of the Cooperative Extension
Service.
Editor: Katherine S. Tippett
Family Economics Research Group
Science and Education Administration
U.S. Department of Agriculture
Federal Building
Hyattsville, Md. 20782
Science and Education Administration, Family Economics Review, Spring 1979
Published by Agricultural Research, Northeast Region, Science and Education Administration,
U.S. Department of Agriculture, Beltsville, Md. 20705
FAMILY ECONOMICS REVIEW
ENERGY CONSUMPTION FOR TEXTILES AND APPAREL
by Annette Polyzou 1
Rising energy prices and uneasiness about
energy supplies have caused continued concern
about energy consumption in all areas of the
economy. Energy is consumed both in the
production and in the use of textiles and
apparel. For assessment of the need and
opportunities for energy conservation in this
area, two questions are basic: (1) How much
energy is consumed in the production of
textiles and apparel in the United States in a
year? and (2) Which type of fiber--natural or
synthetic2 -consumes more energy in terms of
production, maintenance, and wear-life of a
garment? Before discussing these questions, we
should understand the relative importance of
clothing as an item of consumption and
examine trends in consumption of fibers in the
United States.
Clothing and shoes comprised only 6.6
percent of personal consumption expenditures
during the first three quarters of 1978
(table 1). These items, however, are purchased
frequently by individuals and require a great
amount of care. The average per person
expenditure on clothing and shoes in the first
three quarters of 1978 ($398) was higher than
in 1977 ($376). Half of the increase resulted
from a rise in prices and half from increased
buying.
During 197 5-77, the price level for apparel
and upkeep, as measured by the Consumer
Price Index (CPI), increased at an annual
rate of between 3.7 and 4.5 percent, less than
the increase for all items of the CPI (table 2).
Preliminary estimates for the first three
quarters of 197 8 indicate that price increases
are lower for 1978 than for any of the previous
3 years.
During the past three decades, consumption
of fibers produced from petroleum has steadily
1 Home Economist, Family Economics Research
Group, Science and Education Administration, U.S.
Department of Agriculture.
2 The term synthetic is used in this article to describe
fibers derived from wood cellulose and from
petroleum. These fibers are frequently referred to as
"manmade."
SPRING 1979
increased, while consumption of other fibers
has generally declined (9). During the period
1950 to 1977, U.S. per capita mill use of the
natural fibers (cotton, wool, flax, and silk) and
the cellulosic synthetic fibers (mainly rayon
and acetate), on a per capita basis,· generally
declined (table 3). Per capita consumption of
cotton dropped from 30.9 pounds in 1950 to
14.7 pounds in 1977, wool dropped from 4.2
pounds to 0.5 pound, flax, and silk dropped
from 0.1 pound to a negligible amount, and
cellulosic synthetic fibers dropped from 8.9
pounds to 4.0 pounds. U.S. per capita
consumption of the noncellulosic synthetic
fibers (mainly polyester, nylon, acrylic,
modacrylic, olefin, and vinyon), however, rose
from 0.9 pound in 1950 to 37.0 pounds in
1977. As !! percent of tot~ per capita
consumption, cotton accounted for about 69
percent in 1950 and dropped to about 26
percent in 1977. Noncellulosic synthetic fibers,
on the other hand, accounted for only about
2 percent of total per capita fiber consumption
in 1950 and rose to about 66 percent in 1977.
In view of the fact that noncellulosic
manmade fibers accounted for about 66
percent of total per capita fiber consumption
in 1977 and are derived from petroleum, we
might assume that a switch from synthetic to
cotton fiber would save energy. But cotton
production also requires petroleum and other
energy sources.
In addition, production of fibers is just one
segment in the whole chain of production and
use of textiles: fiber to fabric to garment to
maintenance to the end of a garment's life.
According to one study (13), fiber production
accounted for less than 15 percent of the total
energy consumed in the production and
maintenance of a specific garment, while
maintenance of the garment, with commonly
used laundering practices, accounted for
approximately 55 to 80 percent. These data
suggest that for energy conservation the
consumer's adoption of practices that reduce
energy use in maintenance or extend the
wear-life of garments may be more important
than choice of fiber.
3
All
Table 1. Annual expenditures for clothing and shoes, 1960-78
Year
1960 .••••.•.........
1961 •.•••...•.......
1962 ....••......•...
1963 .•..•..•...•.•..
1964 ....•..•...•....
1965 ........•.....•.
1966 .•.•.•..........
1967 .............. ..
1968 •............•..
1969 .•.•..•.........
1970 .•.••..•...••...
1971 .•..•••.•.......
1972 .•......•.•.•...
1973 ••...••.....•...
1974 •...•.••••.•....
1975 ............... .
1976 ..........••••..
1977 •....•..........
19782 ..•............
Per capita
expenditures 1
Constant
dollars Current
(1972) dollars
203 148
203 149
209 154
209 156
222 166
227 172
239 186
236 192
242 208
245 223
240 227
249 244
264 264
281 291
279 308
288 328
298 352
307 376
317 398
Percent of Aggregate
expenditures for expenditures
personal consumption Billions Billions
Constant of constant of
dollars Current dollars current
(1972) dollars (1972) dollars
8.1 8.2 36.6 26.7
8.1 8.2 37.3 27.4
8.1 8.1 38.9 28.7
7.9 7.9 39.6 29.5
8.1 8.0 42.6 31.9
7.9 7.8 44.2 33.5
8.0 7.9 46.9 36.6
7.8 7.8 46.9 38.2
7.7 7.8 48.6 41.8
7.6 7.8 49.6 45.1
7.4 7.5 49.2 46.6
7.5 7.6 51.6 50.5
7.5 7.5 55.1 55.1
7.7 7.6 59.2 61.3
7.8 7.3 59.1 65.3
7.9 7.2 61.4 70.1
7.8 6.9 64.2 75.7
7.8 6.8 66.6 81.5
7.8 6.6 69.3 86.9
1Calculated by dividing aggregate expenditures for each year by population figures for July
of each year.
2Preliminary figures--average of estimates for first 3 quarters of 1978 (i.e., seasonally
adjusted quarterly totals at annual rates).
Sources: U.S. Department of Commerce, Bureau of the Census, 1978, Population estimates and
projections, Current Population Reports, Series P-25, No. 729 (table C). U.S. Department of
Commerce,' Bureau of Economic Analysis, 1978, Survey of Current Business 58(8): 10 (table 11);
and personal communication with Bob Klukus in the Bureau of Economic Analysis.
Table 2. Annual percentage change in selected indexes of consumer prices, 1974-78
Consumer Price Index 1974 1975 1976 1977 19781
items ................................ +11.0 +9.1 +5.8 +6.5 +7.2
Apparel and upkeep2 ................. +7.4 +4.5 +3. 7 +4.2 +3.4
Men's and boys' clothing .......... +7 .9 +4.3 +3.5 +4.6 +2.4
Women's and girls' clothing ...... +6.0 +2.4 +2.8 +3.2 +1.8
Footwear .......................... +6.1 +4.4 +4.0 +4. 7 +3.4
Other apparel commodities3 ........ +4.6 -1.0
1Preliminary estimates--average for first 3 quarters of 1978 was compared with average for
first 3 quarters of 1977.
2Also includes infants' wear, sewing materials, jewelry, and apparel upkeep services, for
which indexes are not available.
3Developed in 1976 to include diapers, yard goods, earrings, wristwatches, and zippers.
Source: U.S. Department of Labor, Bureau of Labor Statistics, 1978, News, Consumer Price
Index (monthly issues); and personal communication with Frank Ptacek in the Bureau of Labor
Statistics.
4 FAMILY ECONOMICS REVIEW
ENERGY USED IN TEXTILE PRODUCTION
Energy consumed in the production of
textiles and apparel in 1976 (the most recent
data available) totaled 1.135 quadrillion British
thermal units (Btu's). 3 Table 4 shows that the
production of fibers consumed the greatest
amount of energy-0. 7 49 quadrillion Btu's, or
about 66 percent of total energy consumed for
textiles and apparel in 1976. The processing of
fibers in textile mills consumed 0.329
quadrillion Btu's of energy, or about 29
percent of total energy consumed. The
manufacture of apparel and other textile items
consumed 0.057 quadrillion Btu's of
energy-only about 5 percent of the total
energy consumed for textiles and apparel in
1976.
The textile mills and manufacturing
industries (not including fiber production)
consumed only about 3.1 percent of total
energy consumed by all U.S. industry groups in
1976 and ranked seventh in energy
consumption behind chemicals, primary
metals, paper, petroleum and coal, stone, clay
and glass, and food industry groups. These six
industry groups consumed about 80 percent of
the energy consumed by all major industry
groups in 1976 (7).
Production of Fiber
Cotton production accounted for about 14
percent of energy consumed in the production
of all fibers (12), while the energy consumed in
wool production was only about 0.1 percent
(4, 6). These fibers accounted for about 29
percent and 1 percent, respectively, of fiber
consumption in 1976 (9). Energy consumed in
the production of synthetic fibers, including
the raw materials and production processes,
accounted for the largest share-86 percent
(including 11 percent for cellulosic and 7 5
percent for noncellulosic fibers) (13).
Energy consumption for cotton production
can be broken down by type of fuel or
electricity used as follows: natural gas, used for
chemicals, fertilizers, irrigation, ginning, and
compressing, accounted for about 59 percent
3 Btu is the quantity of heat required to raise the
temperature of 1 pound of water by 1 degree
Fahrenheit.
SPRING 1979
of total energy consumption for cotton
production; diesel, used for field operations
and irrigation, accounted for about 22 percent;
gasoline, used for farm business transportation,
field operations, and irrigation, accounted for
about 11 percent; electricity, used for
irrigation, accounted for about 6 percent; and
liquid petroleum gas, used for irrigation and
field operations, accounted for about 2 percent
(12 and table 5). Energy consumed in the
production of wool is for farm
operations-mainly the shearing of sheep ( 4).
The production of cellulosic and
noncellulosic synthetic fibers requires
petroleum or natural gas to produce the
petrochemicals (the raw materials) for the
noncellulosic fibers and some form of energy
to convert the petrochemicals (for the
noncellulosics) and the wood cellulose (for the
cellulosics) into fibers (13). Energy
consumption data by type of fuel or electricity
were not available for cellulosic manmade
fibers; for noncellulosic manmade fiber
production, these data were available only for
energy consumed in the conversion of
petrochemicals to fibers-fuel oil ( 39 percent),
coal (30 percent), electricity (19 percent), and
nat ural gas ( 12 percent) ( 7.) .
Production of Apparel and Other Textile Items
Energy consumed in textile mills and
manufacturing industries is used mainly for
apparel-about 81 percent (7). The production
of carpets consumed about 7 percent,
miscellaneous textile goods (felt goods, lace
goods, paddings and upholstery filling,
processed textile waste, coated fabrics, tire and
cord fabric, nonwoven fabric, and cordage and
twine) about 7 percent, and miscellaneous
fabricated textile products (curtains and
draperies, housefurnishings, textile bags, canvas
and related products, pleating and stitching,
automotive apparel trimmings, and machine
embroideries) about 5 percent.
Textile mills produce mainly yard goods but
also some finished items such as carpeting and
knit underwear and hose. Energy consumed in
these mills can be broken down into 29 percent
for weaving, 23 percent for textile finishing, 17
percent for knitting, 14 percent for spinning,
9 percent for rug and carpet production, and
8 percent for production of miscellaneous
5
textile goods. Textile energy consumption can
also be broken down by type of fuel or
electricity used as follows: Electricity (32
percent), oil (31 percent), gas (27 percent), and
coal (10 percent).
Textile manufacturing industries complete
the process of producing apparel and other
textile items from yard goods. Energy
consumed in these industries can be broken
down by type of fuel or electricity used as
follows: 50 percent electricity, 31 percent gas,
17 percent oil, and 2 percent coal.
NATURAL VERSUS MANMADE
It might seem that the trend to greater use
of manmade fibers has in itself increased the
consumption of energy and that energy could
be saved by greater use of natural fibers. But
figures on total consumption of energy for
fiber, fabric, and garment production in the
United States reflect the different amounts
produced. These figures do not indicate how
the total would change if natural fibers were
substituted for synthetic fibers. For valid
comparison it would be necessary not only to
compute the energy used in producing a pound
of each type of fiber, but also to determine the
amounts of fiber used in garments with
comparable uses, to measure the energy used in
producing and maintaining those garments, and
to compare the garments' wear-life. The results
might vary considerably by type of garment,
maintenance practices, and use.
Such comparative data are available from
only one study that compared energy
consumed in the production and maintenance
of a 100 percent cotton shirt with a 65 percent
polyester, 35 percent cotton shirt: 4 Results of
this study suggest that, overall, the 100 percent
cotton shirt is the more costly in terms of
energy use. Although a synthetic fiber shirt
requires about one-fourth more energy to
produce, a natural-fiber shirt requires more
than twice as much energy to maintain over the
same number of laundering cycles and it lasts
only two-thirds as long (table 6). More energy
4 The research was a 3-year study conducted by T. L.
van Winkle et al. from 1974 through 1976 (2, 13). The
study investigated energy consumption through four
stages: fiber production, fabric production, shirt
production, and maintenance.
6
is required to maintain (using common
laundering practices) than to produce both
types of shirts-especially for the 100 percent
cotton one. The total energy required for
production and maintenance, assuming an
equal wear-life and commonly-used laundering
practices, was estimated as 115.5 kilowatt
hours (kWh) for the cotton shirt, compared
with 72.4 for the polyester-cotton shirt.
Production5
The total energy required for fiber, fabric,
and shirt production for a 100 percent cotton
shirt was estimated by van Winkle et al. to be
26.3 kWh versus 32.6 kWh for a 65 percent
polyester, 35 percent cotton shirt.
The energy consumed in the production of
1 pound of cotton fiber was estimated at 6.1
kWh, including fuel and electricity for farm
equipment, irrigation and ginning, and energy
assocated with the production of fertilizers and
pesticides. This figure is similar to the one
reported by the National Cotton Council of
America-6.0 kWh (1). The energy consumed
in the production of 1 pound of polyester fiber
was 21.6 kWh, including energy required for
the removal of petroleum from the ground, for
the production of petrochemicals, and
eventually for the production of the fiber. The
amount of fiber required to produce one shirt
varies by fiber. A 100 percent cotton shirt
required 0.82 pound of cotton and a 65
percent polyester, 35 percent cotton shirt
required 0.62 pound of polyester and cotton
(0.37 pound of polyester and 0.25 pound of
cotton), according to van Winkle et al. The
energy required to produce enough fiber for
the cotton shirt was 5.0 kWh and for the
polyester-cotton shirt, 9.6 kWh.
The energy consumed in the manufacture of
fabric for shirts from the raw fiber includes the
electricity, steam, and natural gas consumed by
5 Relative amounts of energy consumed in fiber
production compared with fabric and garment
production differ between table 4, which pertains to
textiles and apparel as a whole, and table 6, which
pertains to a particular item of apparel. Relative
amounts of energy are likely to differ with the type of
textile item produced. Also, the quantities of energy
consumed in the production of fibers in table 4 include
fibers that are exported.
FAMILY ECONOMICS REVIEW
Table 3. U.S. per capita consumption of fibers, 1950, 1960, 1970, and 1977
Manmade fibers Natural fibers
Year Total
Cellulosic Noncellulosic Cotton Wool Flax and silk
Lb Pet
1950 45.0 100.0
1960 35 .8 100.0
1970 46 . 2 100.0
19773 .. 56.2 100 .0
1Less than 0.1 pound .
2Less than 0.1 percent.
3Preliminary figures .
Lb Pet Lb Pet
8.9 19.8 0.9 2.0
5.8 16 . 2 4. 2 11.7
6.9 14.9 19.3 41.8
4.0 7.1 37 .0 65.8
Lb Pet Lb Pet Lb Pet
30.9 68 .7 4.2 9.3 0.1 0.2
23.4 65.4 2.3 6.4 .1 . 3
18.8 40.7 1.2 2.6 (I) (2)
14 . 7 26.2 . 5 . 9 ( 1) (2)
Source: U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States,
1978, Table 1428--Mill consumption of natural and man-made fibers: 1950-1977, p. 824.
Table 4. Energy consumption for textiles and apparel production in 1976
Category
Fiber production:
Cotton . . ...•...•....... ...•....
Wool .... . .. ..• ..••... ••....•..•
Noncellulosic .... .• ..•• •.. · .•..•
Cellulosic .•............•.•....
Rayon ..............•.......•.
Acetate ••...•...............•
Total ..• ..•.......•. ...••..•
Apparel and other textile
items production:
Textile mills .. .. •.•..........•
Textile manufacturing
industries ..•.•........••.....
Total •..•.. .... ..... ........•. .•.
Quantity of
energy
Quadrillion Btu's
0.103
.001
.563
.082
0.749
.329
.057
1.135
Quantity of
energy per pound
of fiber
Btu's
20,600
1,786
85,027
96,218
100,995
Percent of
total
66
29
5
100
Sources: Textile Economic Bureau, Inc., 1978, Tables: Man-made fiber production; non­cellulosic
fiber production detail, Textile Organon 49(2): 12. U.S. Department of Agriculture,
Economics, Statistics, and Cooperatives Service, 1978, Crop Production Report, May 9, 1978
issue; and personal communication with Millie Jones. U.S. Department of Agriculture,
Economics, Statistics, and Cooperatives Service, 1978, personal communication with Allen Evans.
VanArsdall, R. T., and Starbird, I. R., 1978, Energy, another dilemma faced by cotton, Pro­ceedings
of the 1978 Beltwide Cotton Production-Mechanization Conference, Dallas, Texas,
January 1978, pp. 48-52; and personal communication with R. T. VanArsdall, U.S. Department of
Agriculture, Economics, Statistics, and Cooperatives Service, Washington, D.C. U.S. Department
of Commerce, Bureau of the Census, 1978, Fuels and electric energy consumed--industry group and
industries, Annual Survey of Manufacturers, 1976, M76(AS)-4.1, Washington, D.C. van Winkle,
T. L., Edeleanu, J., Prosser, E. A., and Walker, C. A., 1978, Cotton versus polyester, American
Scientist 66(3):280-290; and personal communication with T. L. van Winkle. The Wool Bureau,
Inc., 1978, personal communication with Marguerite Gadel, 360 Lexington Avenue, New York, N.Y.
SPRING 1979 7
Table 5. Percent of total energy consumption for textiles and apparel by type of fuel or
electricity consumed in 1976
Category Gasoline Diesel Liquid Natural Fuel Coal Elec-propane
gas oil tricity
Production of fiber:
Cotton ................... 11 22 2 59 (1) (1) 6
Noncellulosic ........... (1) ( 1) (1) 12 39 30 19
Production of apparel and
other textile items:
Textile mills ........... (I) (I) (I) 27 31 10 32
Textile manufacturing
industries ............. (1) (I) ( 1) 31 17 2 50
1Not available.
Sources: U.S. Department of Commerce, Bureau of the Census, 1978, Fuels and electric energy
consumed--industry group and industries, Annual Survey of Manufacturers, 1976, M76 (AS-4.1).
VanArsdall, R. T., and Starbird, I. R., 1978, Energy, another dilemma faced by cotton, Proceedings
of the 1978 Beltwide Cotton Production-Mechanization Conference, Dallas, Texas, January 1978,
pp. 48-52; and personal communication with R. T. VanArsdall, U.S. Department of Agriculture,
Economics, Statistics, and Cooperatives Service, Washington, D.C.
Table 6. Comparison of energy consumption in the production and maintenance
of a 100 percent cotton shirt and a 65 percent polyester,
35 percent cotton shirt
Category Cotton Polyester-cotton
kWh kWh
Fiber production .........•... 5.0 9.6
Fabric production .......... . 18.5 20.2
Shirt production ..•.....•..• 2.8 2.8
Total production 26.3 32.6
Maintenance1 89.2 39.8
Total •....•........... 115.5 72.4
lEased on 50 laundering cycles.
Source: Adapted from van Winkle, T. L., Edeleanu, J., Prosser, E. A.,
and Walker, C. A., 1978, Cotton versus polyester (Table 4), American
Scientist 66(3): 286.
8 FAMILY ECONOMICS REVIEW
weaving and finishing mills. 6 Energy for
production of cloth for a 100 percent cotton
shirt and a 65 percent polyester, 35 percent
cotton shirt was estimated at 18.5 kWh and
20.2 kWh, respectively.
Energy required to manufacture both types
of shirts was estimated to be 2.8 kWh, based on
a 2-year average amount of electricity and
natural gas used for operating machinery and
for heating and air-conditioning plants.
Maintenance and Wear-Life7
Energy required to maintain each type of
shirt through 50 cycles of washing, drying, and
ironing was estimated at 89.2 kWh for the
cotton shirt and 39.8 kWh for the
polyester-cotton shirt (table 6). This included
energy to wash, dry, and iron garments by
laundering practices commonly used in the
United States-washing and drying in
automatic machines with separated loads
(cotton on regular cycle, hot wash and hot
rinse, and polyester-cotton on permapress
cycle, hot wash, cold rinse); removing shirts
from the dryer when dry; and using an electric
iron for both types of shirts. Use of
energy-conserving laundering methods8 could
reduce energy requirements about two-thirds,
to 31.0 kWh for the cotton shirt and 13.7 kWh
for the polyester-cotton shirt.
The polyester-cotton shirt was estimated to
last 7 5 laundering cycles, about one-and-a-half
times as long as the cotton shirt, which lasted
only 50 cycles. Taking this into account, the
6 Energy consumed by weaving and finishing mills
was 6.53 kWh per square yard for 100 percent cotton
fabric and 7.13 kWh per square yard for the 65 percent
polyester, 35 percent cotton fabric. The amount of
fabric required for the production of a shirt was given
at 2.833 square yards.
7 Estimates of energy consumed in maintaining each
type of shirt as well as estimates of wear-life of the
shirts used by van Winkle et al. were based on data
from other studies.
8 This included an energy- and water-saving
automatic washer (wash water for two loads, warm
wash, cold rinse-for both types of shirts), no
automatic dryer, and an electric iron.
SPRING 1979
cotton shirt would consume even more energy
than the polyester-cotton shirt for production
and use.
In actual use, the wear-life of garments may
vary considerably among consumers. Changes
in fashion may cause garments to be discarded
long before they actually are worn out, or
individuals may treat some garments with extra
care, thus greatly increasing their wear-life.
Maintenance practices may also differ from the
study method. Garments washed in warm or
cold water rather than hot water, hung to dry
rather than put in the dryer, and worn without
ironing would consume less energy for
maintenance.
ENERGY CONSERVATION
According to several trade sources,
energy-conserving techniques have already been
introduced in the fiber, fabric, and
garment-production areas of textiles and
apparel. They have been adopted in the
production of both natural and synthetic
fibers. Such conservation programs are
expected to continue and expand.
Consumers may conserve energy by altering
their maintenance practices, by extending the
wear-life of garments where possible, and by
selecting garments that require less energy for
maintenance. For example, a no-iron,
all-cotton shirt, soon to be on the market, will
provide convenience and some energy savings
(14 ). Means of conserving energy used in
maintenance include using laundering
equipment with energy-conserving features,
using cold water for wash and rinse cycles,
hanging garments to dry, and reducing the need
for frequent laundering by spot cleaning and
wearing protective coverings such as aprons and
underarm shields. The wear-life of garments
may be extended by less frequent laundering of
garments, by greater care in wearing and
storing garments, and by selecting styles and
fabrics that will be acceptable for longer
periods of time. Sanitation as well as the
general appearance of garments should be
considered in deciding on specific means of
conserving energy.
9
References
1. Bowling, A. L. 1978. Energy for food and
fiber. Paper presented at the
Masssachusetts Institute of Technology,
January 1978. National Cotton Council
of America, Memphis, Tenn.
2. Man-Made Fiber Producers Association,
Inc. 1978. New study from Yale
University shows an all-cotton garment
uses 88% more energy than polyester
blend. Focus on Man-Made Fibers, Issue
No. 5. Washington, D.C.
3. Textile Economic Bureau, Inc. 1978.
Tables: Man-made fiber production;
noncellulosic fiber production detail.
Textile Organon 49(2): 12. New York,
N.Y.
4. The Wool Bureau, Inc. 1978. Personal
communication (September 22) with
Marguerite Gadel, 360 Lexington
Avenue, New York, N.Y.
5. U.S. Department of Agriculture,
Economics, Statistics, and Cooperatives
Service. 1978. Crop Production Report,
May 9, 1978 issue; and personal
communication with Millie Jones.
6. 1978. Personal communication
Allen Evans.
7. U.S. Department of Commerce, Bureau of
the Census. 1978. Fuels and electric
energy consumed, industry group and
industries. Annual Survey of
Manufacturers, 1976 M76(AS)-4.1.
Washington, D.C.
8. 1978. Population estimates
and projections. Current Population
Reports, Series P-25, No. 729 (table C).
9. 1978. Mill consumption of
natural and man-made fibers:
1950-1977 (table 1428). Statistical
Abstract of the United States, 1978,
p. 824. Washington, D.C.
10. U.S. Department of Commerce, Bureau of
Economic Analysis. 1978. Survey of
Current Business 58(8): 10 (table 11);
and personal communication with
Bob Klukus of the Bureau of Economic
Analysis.
11. U.S. Department of Labor, Bureau of
Labor Statistics. 1978. News; Consumer
Price Index (monthly issues); and
personal communication with Frank
Ptacek in the Bureau of Labor
Statistics.
12. VanArsdall, R. T., and Starbird, I. R.
1978. Energy, another dilemma faced
by cotton. Proceedings of the 1978
Beltwide Cotton Production­Mechanization
Conference, Dallas,
Texas, January 1978, pp. 48-52; and
personal communication with R. T.
VanArsdall, U.S. Department of
Agriculture, Economics, Statistics, and
Cooperatives Service, Washington, D.C.
13. van Winkle, T. L., Edeleanu, J., Prosser,
E. A., and Walker, C. A. 1978. Cotton
versus polyester. American Scientist
6 6 ( 3) : 2 8 0- 2 9 0 ; and personal
communication with T. L. van Winkle.
14. Watterson, T. 1978. All-cotton shirts try
comeback. The Christian Science
Monitor 70(234): 17. [October 27,
1978 issue.]
THE FOOD PRICE OUTLOOK FOR 1979
by J. B. Penn 1
1 Deputy Administrator for Economics; Economics,
Statistics, and Cooperatives Service, USDA. Condensed
from a paper presented at the Food and Agricultural
Outlook Conference in November 1978, at
Washington, D.C. Complete copies are available from
Economics, Statistics, and Cooperatives Service,
Information Division, Publications Unit, Room 0054,
South Building, Washington, D.C. 20250.
10
Each year we are asked to put our collective
analytical expertise "on the line "-to present
our expectations for the behavior of food
prices over the coming year.
Food prices are an important factor in
shaping the inflation psychology of consumers.
They are also a critical element in the wage­price
spiral now plaguing the economy. Before
FAMILY ECONOMICS REVIEW
discussing the USDA food price forecast for
1979, I want to review the most common
measure of food prices and to quickly note
food price behavior in past years to provide
some perspective in which to place the outlook
for 1979.
MEASURING FOOD PRICES
The Consumer Price Index for Food
The most widely used measure of prices at
the retail level is the Consumer Price Index for
all urban consumers (CPI-U). The food price
data used to develop the CPI-U are collected
throughout each month for a wide variety of
typically purchased foods. Month-to-month
changes in these prices are weighted by their
importance in the food budget and are
reported in the form of index numbers for
major product groups (for example, meats,
dairy products, and cereal and bakery prod­ucts).
The reports are then released to the
public with about a 1-month lag.
The CPI-U is a price index. A 10 percent
increase in the CPI-U for food does not
necessarily imply that the average consumer
spends 10 percent more for food. Consumers
adjust what they buy in response to higher or
lower prices but the process used to develop
the CPI-U does not take such adjustments into
account. The CPI-U is, therefore, best thought
of as a price index and not a cost of living
index.
This distinction is particularly important for
food. Food prices for specific items can be
quite volatile because of supply disruptions
owing to biological phenomena or natural
disasters. Lettuce prices in some areas in spring
1978 increased to over $1.00 per head­reflecting
the reduced quantities available for
sale. Undoubtedly, some people bought less
lettuce. But the CPI-U only reflected the fact
that retail lettuce prices were 125 percent
higher.
The relative importance of food in the CPI-U
is about 18 percent, reflecting on average the
proportion of consumer expenditures that go
for food. The all-food index is subdivided into
two major components: food-at-home (12.2
percent) and food-away-from-home ( 5.5 per­cent).
Meat purchases now account for about
32 percent of all food-at-home purchases.
SPRING 1979
Other important groups include fruits and
vegetables (14.4 percent), dairy products (13.5
percent), and cereal and bakery products (12.5
percent). Increasingly important categories are
the nonalcoholic beverages (12.4 ·percent) and
the processed foods (8.5 percent).
Food Price Determinants
The challenge in food price forecasting is to
predict the value of the CPI-U. In deriving
forecasts of this index, the USDA effort
centers on expected price determinants in three
broad areas:
• The farm production sector,
• the-food marketing system, and
• consumer purchase conditions.
Farm commodity prices. Even though raw
farm commodities have over time become a
smaller proportion of total food expenditures,
conditions in the farm sector are still essential
to evaluating the food price situation. On the
average, the farmer's share of expenditures for
domestically produced farm foods is now
about 40 percent. For total food expenditures,
it is much smaller-26 percent.
Commodity prices are largely determined by
what is produced, both domestically and
worldwide. The quantities produced, however,
are heavily influenced by the rather unpre­dictable
forces of nature-weather, pest
infestations, and plant and animal diseases.
These occurrences are nearly impossible to
predict. Yet, they are usually the source of
food price forecast errors.
Last year was an excellent example. The
major contributors to the larger than
anticipated food price increases were red meat
and fresh vegetable prices. In both cases,
weather was the indirect, if not the direct,
cause. Severe cold weather in the primary
hog-producing States for the second
consecutive year adversely affected the
availability of pork. Early indications were for
hog farrowings to be 13 percent higher from
December 1977 through February 1978 than
for the same period a year earlier. When the pig
numbers became available, however, farrowings
were actually down 1 percent. Weather-induced
disease, breeding problems, and other losses
resulted in 1978 pork production being only 1
11
percent higher than in 1977. A 10 percent
increase was originally forecast.
The weather-induced problem touched off a
chain reaction in meat prices. Without the
increased pork production, which had been
expected to dampen the beef price increases,
prices of both beef and poultry increased at a
much more rapid rate than expected.
Then, following a prolonged drought, the
rains came to California. Planting and harvest
schedules for some vegetables, notably lettuce,
were disrupted. Lettuce prices, usually in the
$2.50 to $5.00 per crate range, increased to
$18.00 (300 percent). · In addition,' the cold
weather early in 197 8 affected the availability
of some fruits, and their prices rose
unexpectedly.
The approximate 15 percent increase in all
farm commodity prices this year contributed
about 40 percent to the 1978 increase in food
prices.
Marketing costs. The costs for marketing
food-for transforming and transporting from
the farm to the supermarket-are becoming
increasingly important. In 1978, increased
marketing costs for domestically produced
farm foods were responsible for about half of
the higher food costs.
The largest single component of the mar­keting
bill is labor, accounting for 47 percent.
It was widely publicized when labor costs
exceeded the farm value for the first time in
1977. Labor costs for 1978 increased another
10 percent over the 1977 level.
Food prices are now being more significantly
influenced by increasing costs for energy­related
inputs. Packaging and transportation
costs, which account for about 21 percent of
total marketing charges, are highly dependent
on energy prices. Packaging costs in 1978
increased about 6 percent, while transportation
costs were about 10 percent higher than in
1977.
Consumer purchase conditions. The influ­ence
of changing conditions for food demand is
of varying importance to food prices. There is
no doubt that nsmg incomes, reduced
unemployment, and the increased population
influenced food prices in 1978. But, other
more subtle changes are underway as well.
There are more multiple income families;
family sizes are smaller; and the roles of
12
women and men are changing. These changes
alter the kinds of foods purchased and place
more emphasis on marketing services.
The impact of these changes is already being
reflected in the relative weights attached to the
various components of the CPl. Adoption of
the broader-based CPI-U with its changed
weights did influence the food price situation
this year. (See FAMILY ECONOMICS
REVI_EW, Summer 1978 issue, p. 22, for a
discussion of the revision in the CPl.)
• Food-away-from-home now has a 31
percent weight-9 percent more than in
the unrevised index. The "other processed
food" category has increased in impor­tance
by more than 50 percent.
• The nonalcoholic beverage category now
has a 12.4 percent weight-30 percent
higher than previously.
• Purchases of those foods without a
domestic farm product base (fish and
foreign foods such as coffee and bananas)
now account for almost 20 cents out of
each dollar spent on food-up from about
11 cents in 1967. Clearly, these foods are
becoming relatively more important.
FOOD PRICES IN REVIEW
While food price increases are headline news,
it is important to view such reported increases
in historical perspective. An examination of the
year-to-year changes in retail food prices since
1950 reveals that, in 17 of the 27 years, food
price increases contributed less than 1 per­centage
point to the overall rate of inflation. In
four of those years, 1953, 1954, 1955, and
1959, food prices actually reduced the overall
rate of inflation in the general economy.
The more recent history is a somewhat
different story, however. Four of the largest
year-to-year percentage changes in retail fo-od
prices have occurred since 1972. In every year
except 1976, food price increases have con­tributed
more than 1 percentage point to the
overall inflation rate.
THE FOOD PRICE OUTLOOK FOR 1979
By making alternative assumptions about
increased costs in each of the three major
components of total food expenditures, we can
develop a range for our 1979 food price
FAMILY ECONOMICS REVIEW
forecast. These three components are:
1. The value of farm commodities­accounting
for about 26 percent of total
food expenditures. This is a highly
volatile component since production is
determined by domestic and worldwide
weather, policies of major trading
nations, and other related factors.
2. The costs for marketing services­accounting
for about 57 percent. The
marketing services component is more
directly affected by price changes
(inflation) in the general economy than
are the other two components. Thus,
while prices and costs of the various
categories such as labor, packaging, trans­portation,
and energy will individually
vary, increased costs for the marketing
services will at least reflect the underlying
rate of inflation.
3. The costs for "other foods"-foods with­out
a domestic farm base-accounting for
17 percent. Price increases in this
category are generally determined by
conditions outside the United States.
These products are generally imported
and include such items as fish, coffee,
bananas, and sugar. Their prices are
highly volatile; since 1970, price increases
for foods in this category have exceeded
145 percent, compared with a 60 percent
increase for domestically produced foods.
Our conservative or minimum estimate for
food price increases this year is a 6 percent rise
over 197 8. This explicitly assumes a slowed
rate of inflation (6 percent), no weather
adversities, and increased output of pork and
broilers.
But what if we are not so fortunate?
Suppose we have weather problems in 1979
that repeat those of last year. And, what if the
inflation rate moves to an 8 percent annual
rate? We can view this as a "worst case"
situation to establish an outer point of the
range. This set of circumstances could have
food prices again increasing 10 percent.
Having established this rather wide range-6
to 10 percent-can we be more specific about
what can logically be expected from our
vantage at this point in time? I think we can.
• Our analysis of the world and domestic
agricultural supply-demand situation
SPRING 1979
suggests that prices of all farm com­modities
will increase 7 percent in 1979,
adding 2 percent to the overall food price
increase.
• A review of the macroeconomy suggests
the rate of increase in marketing costs in
1979 will probably be about 7 percent,
increasing food prices by 4 percent.
• Price increases for foreign foods, fish, and
nonalcoholic beverages can be expected to
add 1. 5 percent to the increase.
Thus, summing up these three components
for this presently most likely situation, we
would expect retail food prices to increase
about 7% percent in 1979. As is generally the
case, price increases will be most evident during
the first half of the year. During the third and
fourth quarters, increases should moderate, and
prices may even decline slightly.
Farm product prices in each major category
are now expected to be higher than in 197 8. At
this time in the year there is little alternative
other than assuming favorable weather for
1979 and the corresponding implied crop
production levels. Thus, even though prices for
all commodites are expected to increase 7 per­cent
in 1979 (about half the increase of 1978),
this is due primarily to livestock and not crops.
Grain prices are expected to remain stable,
exhibiting perhaps only a slight increase for
feed grains.
The largest expected price increase for any
commodity group is for livestock. Meat animal
prices are expected to increase about 13
percent, reflecting the higher cattle prices.
Expansion in poultry production will result in
stable to slightly declining prices in the poultry
and eggs category. Dairy product prices will
again increase about 8 percent, similar to 1978.
There is an adage that "if you can't forecast
well-forecast often." Food prices, as we have
seen in 1978, are not easy to forecast with a
great deal of accuracy. Unexpected events will
no doubt alter the outlook I have just pre­sented.
It will, of course, be revised over the
year to reflect the changing conditions. I invite
you to watch for our monthly analysis
published in AGRICULTURAL OUTLOOK.2
'A single free copy of Agricultural Outlooky which
is published monthly , can be obtained by writing to :
Agricultural Outlook, ESCS, USDA, GHI Building,
Washington, D.C. 20250.
13
THE OUTLOOK FOR HOUSING IN 1979
by Robert}. Sheehan 1
Housing Market
Residential construction activity occurred at
very high levels during 1977 and 1978. In 1977
there were 1.988 million units started and the
1978 level (not yet available) is expected to be
about the same. These 2 years will be the
fourth and fifth best years for new housing
production in the history of the United States.
There were only 3 better years-1971 1972 and 1973---at 2.1, 2.4, and 2.1 million' starts,'
respectively. Those years, however, were
supported by high levels of Federal
Government subsidized units; during each,
there were about 400,000 new units that
received subsidies either from the Department
of Housing and Urban Development or the
Farmers Home Administration. In 1977 and
1978 there were only about 100,000
subsidized new units. Thus, these 2 years were
record years of production in terms of
privately financed construction.
197 8 surpassed the level expected by most
forecasters, and those who did call it may have
been right for the wrong reasons. During 1977
the rate of inflation rose sharply, and along
with it, interest rates. By September 1977
interest rates, especially for Federal
Government securities, were high enough to
provide strong competition for savings. The
.Uow of savings into the thrift institutions
(savings and loan associations and mutual
savings banks), which are the principal source
of mortgage funds in this country, began to
drop substantially. The slowdown continued
for several months into May 1978. In each of
these months, net new savings in the thrifts
were about 50 percent under the same month
in the previous year. These institutions were
coming to the point where they would not
have money to lend for new mortgages at the
record levels that had been occurring. Also,
dramatic price increases in both new and
existing homes had been continuing. This alone
would require substantial new funds just to
1 Associate Chief Economist, National Association of
Home Builders. Paper presented at the Food and
Agricultural Outlook Conference in November 1978 at
Washington, D.C. '
14
support the same unit level of activity. A
crunch was expected in 1978, with a
consequent sharp downturn in new housing
starts.
Then in late May 1978 the money managers
of the United States stepped in and made
commercial banks and the thrifts more com­petitive
for savings. The announcement caught
the financial community by surprise. These
money managers-the Federal Reserve Board
(which regulates commercial banks) and the
Federal Home Loan Bank Board (which
regulates the savings and loan industry)­approved
two new money market instruments.
One was designed to capture short-term savings
and the other, long-term. The long-term
instrument was an 8-year certificate of deposit
which could carry an 8 percent interest rate. It
was the short-term instrument that had the
most pronounced effect. This was a 6-month
certificate of deposit whose rate was tied to the
yields on 6-month U.S. Treasury bills. These
6-month U.S. Treasury bills are one instrument
that the Federal Government uses to finance its
operations and debt. The 6-month bills, com­bined
with the Government's 3-month bills
become a leading indicator of the direction of
inter~st rates in general. When their yields rise,
especially as a result of the high level of the
Federal deficit, investors are attracted to them
and take their money out of commercial banks
and thrifts which are limited in the interest
they can pay. The newly available 6-month
certificates of deposit now made commercial
banks and thrifts competitive for funds. In the
case of the thrifts they also could add a quarter
of 1 percent above that paid by the U.S.
Treasury Department and commercial banks.
This is similar to the advantages that they have
on their other types of accounts.
During June 1978-the first month the
6-month certificates were permitted to be
issued-the flow of new savings into the savings
and loan industry turned around and has
continued that way ever since it should be
noted that the new flows were still not at
comparable levels to previous periods but they
were substantial. The expected downturn in
FAMILY ECONOMICS REVIEW
housing starts did not occur. The seasonally
adjusted annual rate of housing starts has
stayed over the 2-million level.
In spite of this change, all is not positive for
the housing market. The general rate of
inflation, as measured by the Consumer Price
Index, was at double-digit levels Sf!veral times
during 1978 and was expected to end up at
around 9 percent. This compares to 6.6 percent
in 1977 and 4.8 percent in 1976. New home
prices have been increasing at a 12 to 14
percent rate over the past 2 years. Building
materials prices, which used to change
generally about once a year, are now changing
so often that builders have difficulty obtaining
quotes. Land development regulations and
growth moratoria are pushing up land prices.
And mortgage interest rates are pushing over
10 percent in a number of markets.
In prior economic cycles, housing led the
economy into recession when mortgage market
funds dried up. It wasn't mortgage interest
rates that stopped housing sales; it was the lack
of loanable funds. The new money market
certificates have changed this-at least
temporarily. Mortgage money also has been
more available because of other more active
sources of funds. The Federal Home Loan
Bank Board (FHLBB) can make loans to its
member institutions, and it did so at very high
levels in 1978. Also, the secondary
markets-where mortgages are purchased from
lenders who, in turn, can lend these proceeds
out again-have become more important. The
principal operator in this market is the Federal
National Mortgage Association (Fannie Mae).
In 197 8 they made net purchases of $12 billion
in mortgages. Both the FHLBB and Fannie Mae
obtain the funds they use for the loans and
mortgage purchases from the general capital
markets. This means they draw in new money
to the residential mortgage markets. These
three sources of funds-money market
certificates, FHLBB loans, and secondary
markets-are protecting the mortgage market
from drying up. This sutuation will provide a
new test of how the price of money and the
cost of houses affect the housing market.
At some point housing costs and mortgage
interest rates will force substantial numbers of
families out of the housing market.
Households, for the past few years, have been
SPRING 1979
willing to buy new homes and spend more of
their income on housing. At what point will
they give up? This is not known precisely, but
we know lenders will become more cautious.
Hence, the result will be that buyers will decide
to postpone their purchases-and this trend will
continue in 1979.
The mortgage supply problem is not behind
us. At least 17 States have usury laws which
essentially limit mortgage interest rates to 10
percent or less. With the dramatic tightening in
monetary policy, evidenced by the recent
actions of the Federal Reserve Board and the
Administration to support the dollar in foreign
markets, it is clear that the mortgage rate will
rise above 10 percent. Lenders will be unwilling
to seek savings that will essentially cost them
money. Thus, they will slow down their
willingness to accept the new money market
certificates, and that means that less mortgage
money will be available in the States with
usury laws.
Certainly some of these 17 States will raise
their ceilings, but this takes time. Raising the
usury ceilings becomes an emotional issue, and
by the time they are raised the crunch is
usually over. They only tend to help raise the
level for the next tight money period.
All of this forms the framework for the
National Association of Home Builders'
forecast. The forecast is based on certain
assumptions. We anticipate that short term
interest rates will peak early in the first quarter
of 1979. This would mean that Treasury bill
yields will go over 10 percent, and the prime
rate will reach the 11 to 12 percent range.
They would then decline over the rest of the
year. The secondary mortgage markets and the
Federal Home Loan Bank Board advances will
still be strong. The Administration's inflation
policy will be somewhat effective, and inflation
should drop to a 7 percent level for the year.
Overall economic growth will be about 1.5 to
1. 7 5 percent for the year in real terms as
measured by Gross National Product. This will
be less than half the 1978 rate. Personal
income will rise at about a 9 percent rate,
down markedly from the 11.3 percent of 1978.
Unemployment should rise moderately to the
6.5 or 6.6 percent level.
These assumptions produce a housing starts
forecast of 1.65 million units for 1979, down
15
15 percent from 1978. The downturn would be
shared proportionately by the single and
multifamily sectors. Single family starts are
expected to drop to 1.150 million units, off
220,000 units from the 1.370 million units
produced in 1978. Multifamily starts are
predicted to decline to 500,000 units, down
90,000 units from the expected 590,000 starts
for last year.
Uncertainty is the best description for this
forecast. The recent sharp rise in interest rates
may lead to a longer period of high rates and
further dampen investor and consumer
confidence. There is now a 60 to 70 percent
chance for a recession for 1979. If monetary
policy does not loosen up after the first quarter
of 1979 and economic confidence wanes even
further, the forecast could change to the
1.50-1.55-million level.
I don't mean to bring you a picture of doom
and gloom-but forewarned is forearmed and
the outlook today is less than rosy.
Design of Homes
I was asked to comment on the future design
of homes as they will be affected by energy
consumption, costs of materials, smaller family
sizes, and changing life styles.
Presently we are working on a 10-year
housing starts forecast. Preliminary results
show that we can expect a high level of
production for the 1979-88 period. Starts
should average 1.9 million units per year over
the period, with single family units taking a 70
percent share. The market will continue to be
dominated by the 25- to 35-year-old heads of
households who were born in the post World
War II baby boom.
To date, the housing market has not been
visibly affected by smaller family sizes. Units
have become larger, with the median size
increasing to 1,610 square feet in 1977 from
1,590 square feet in 1972. Higher incomes and
greater demand for space have led to this
pattern. This trend may be reversed now by
change from another sector-tax laws.
The 1978 tax bill now permits the
exemption of up to $100,000 of the profit on
the sales of homes occupied by owners over 55
years of age. Owners can take advantage of this
change in the tax law once in their lifetime.
16
These households-who are likely to be "empty
nesters" (without children)-have not been able
to take advantage of the sharp rise in their
property values. If they had a desire to move
into a smaller unit, the tax laws constrained
them. Moving into a smaller unit meant paying
a smaller price, plus having to pay capital gains
taxes. Now that they are freed from this
restriction, more of them will move. After all,
it's practically a windfall from heaven to be
able to save all the capital gains tax money.
And, at 55 or over, that's a healthy chunk
toward retirement plans. Smaller units will
benefit, especially condominiums and
townhouses. It is too early to determine the
magnitude of this change, both in demand for
smaller units and the amount of space required.
But, believe me, the change will happen.
Concern over energy consumption is
primarily manifesting itself in the greater use of
insulation and passive solar collectors. The
placing of new residential structures on lots is
becoming more of a science, based not only on
drainage, sewage, water sources, etc., but also
on direction toward the sun. Passive solar
collectors, which in current technology are
primarily windows, are reliant on their position
to the sun for effectiveness. Technology for
solar collectors to provide energy for heating
and cooling and other uses is still in its infancy.
Very little equipment is economically viable. A
continued high level of migration toward the
Sunbelt States will keep up the interest and
investment in solar energy.
Finally, there is little that can be said about
the effects of the higher costs of building
materials. From recent trends there is no
evidence that the basic materials used in
housing production will change. All prices are
rising together, with only short term lags
between competing materials. The only major
change in the last few years has occurred in
exterior sheathing materials. Previously,
sheathings were primarily made of either
plywood or wood byproduct composition
boards. Greater needs for insulation in walls
has led to the use of insulating materials for
sheathing. Styrofoam and other
petrochemical-based materials have been the
primary substitute materials. Other changes
will no doubt occur, but they are not now
evident.
FAMILY ECONOMICS REVIEW
FARMERS HOME ADMINISTRATION RURAL
HOUSING PROGRAMS
by L. D. Elwell 1
As a Nation, several years ago we adopted as
our housing goal to provide for e-very family,
the young and old, the urban and rural, an
opportunity to have a decent home.
Considerable progress has been made toward
accomplishing this goal in the past quarter
century but much remains to be done,
particularly for the low-income families in rural
areas. Statistics sometimes may lure us into
thinking that the problem is solved; however,
those of us who work in rural areas know that
is not the situation.
One-third of our population lives in rural
America. This one-third of our population,
however, has 42 percent of the Nation's
substandard housing and 40 percent of the
Nation's poverty. Many people are aware of the
poor housing in the slums of our large cities,
but few realize how deeply this blight also
reaches into the open country and the small
towns.
In my opinion, one of the most important
things needed to resolve rural housing problems
is a delivery system that puts the housing credit
out where the assistance is needed. The
Farmers Home Administration (FmHA) has
such a delivery system. We have 46 State
offices and approximately 1,800 county offices
serving every county or parish in the 50 States
plus the Pacific Trust Territory, Guam, Puerto
Rico, and the Virgin Islands. Each county
office is staffed with people who live and work
in the local communities and become
acquainted with the local leaders and others
who work toward the common goal of helping
families improve their housing. In dealing with
the problems of low-income families, we
believe it is essential to have county office
personnel who can talk with low-income
families across the table to be sure that they
understand the problems and then can guide
1 Assistant Administrator, Farmers Home
Administration, USDA. Condensed from a paper
presented at the Food and Agricultural Outlook
Conference in November 197 8, at Washington, D.C.
Complete copies are available from the Consumer and
Food Economics Institute (see inside cover of this issue
for address).
SPRING 1979
the family towards a satisfactory solution.
Families in this income bracket cannot or often
are hesitant to do business by telephone, long
distance commuting, .or mail. They need to be
able to talk to someone to explain their
problem. FmHA's delivery system is designed
to provide this needed "face-to-face" contact.
FmHA has a number of rural housing
programs or "tools" that can be used to
improve a family's housing condition. FmHA
should not be thought of as a banker or lender.
FmHA is a lender of last resort or secondary
lender. This means that we serve only those
who are unable to obtain the needed housing
loan from a private lender. Many people
immediately think of persons who have bad
credit ratings; however, this is not the case. Our
experience indicates that many rural areas are
not served by private lenders providing housing
· credit. Furthermore, there are many families
who simply do not have the downpayment or
who cannot afford the loan terms required by
private lenders. There are six major FmHA
housing programs that can be used to provide
assistance in rural areas.
Section 502 RH Loans are made to a family
to buy, build, or improve a modest home of
their own. Three types of loans are available
under this program:
1. Insured loans to low- and moderate­income
families. These are direct loans made
by FmHA for buying the site, building the
house, and providing the related facilities.
Eligible applicants are those who are unable to
obtain a loan from a private credit source, who
have adjusted incomes of $15,600 or less, but
sufficient income to repay the FmHA loan.
The moderate-income families have adjusted
incomes of between $11,200 and $15,600.
These families currently pay 81h percent
interest, and the loan can be amortized over a
period of up to 33 years. Low-income families
are those having adjusted incomes of $11,200
or less; they receive approximately 60 percent
of our loans. They are eligible for interest
credit assistance, which is a subsidy paid by
FmHA to lower the effective interest rate from
81;2 percent to as low as 1 percent. The family
17
pays 20 percent of its income for principle,
interest, taxes, and insurance with FmHA
subsidizing the balance. The average effective
interest paid by the families in this income
category is about 2.9 percent. At the end of
fiscal 1977, the average size house contained
1,057 square feet of living area, the average
loan was $25,067, and the average family size
was 3.4 persons per family. The median income
for FmHA borrowers for this period was
$10,433 compared with $15,679 for borrowers
receiving loans made by conventional lenders
(see table).
2. Guaranteed loans for families with above­moderate
incomes. This loan is made by a
private lender, but FmHA guarantees 90 per­cent
of the amount loaned. These loans are
made to families with adjusted incomes of
between $15,600 and $20,000. The interest
rate will be determined on a negotiated basis
between the lender and the applicant; however,
the interest rate cannot exceed the rate charged
on other similar loans in the area. The house
must be modest in size, design, and cost, but
may be somewhat larger and contain amenities
not financed under the insured program. There
Family and housing characteristics of families who moved into their homes
in the U.S. rural areas from 1' 74 to 1976 by type of mortgage
18
Type of mortgage
Characteristic
FmHA FHA VA Conven-tional
Median income dollars .. 10,433 15,083 18,652 15,679
Median age of family
head 0 •• ••••• 0. 0 0. 0 0 •• years .. 29.7 31.5 32.7 31.1
Ethnic origin:
Black • 0 ••• 0 •••••• 0 percent .. 11.2 7.9 3.9 2.6
Spanish American ..... do 4.6 1.1 2.1 1.2
Other1 •.•••••.•...••• do .... 84.2 91.0 94.0 96.2
Type of sewage disposal:
Public sewer
connection ••• 0 ••• percent 43.7 48.6 53.3 26.4
Septic tank or
cesspool 0 00 ••••••••• do 56.3 51.4 46.7 72.5
Other ••••••••• 0 . 0 •••• do 0 0 0 1.1
Water source:
Public or private
system 0 0 •• 0 0 0 0 0 •• percent .. 68.9 77.9 81.2 53.5
Individual well ••• 0 •• do 30.6 20.7 18.3 41.8
Other • • 0 ••• 0 •• 0 •••••• do .... . 5 1.4 .5 4.7
Type of heat:
Natural gas • • 0 •••• percent .. 26.4 39.0 46.0 29.7
Bottled gas • 0. 0 ••••• 0 do 6.3 6.6 6.5 14.3
Fuel oil kerosene 0 ••• do 11.4 13.4 10.8 22.4
Electricity 0 ••••••••• do 52.8 40.3 36.7 31.6
Other ••• 0 0 •••• 0 •••••• do 3.1 . 7 0 2.0
Median distance to
work 0 •••• 0 0 •• 0. 0 0 0. 0 miles ... 11.0 13.5 13.2 10.2
lrncludes other whites and other ethnic groups.
Source: U.S. Department of Commerce, Bureau of the Census, Annual
Housing Survey, 1976 (unpublished data).
FAMILY ECONOMICS REVIEW
is no dollar limit as to the amount of house;
however, above-moderate housing is generally
limited to housing containing 1,400 square feet
or less of living area. This above-moderate
program will permit us to provide needed
assistance in many rural communities where
lenders are not able or willing to :tnake a loan
without a guarantee. Applicants will be
required to make a downpayment of 3 percent
of the first $25,000 and 5 percent of any
amount above that. The loans can be repaid
over a period of up to 33 years.
3. Home Ownership Assistance Program
(HOAP) for the very low-income family. Under
this program a family will pay 25 percent of its
income toward principle, interest, taxes,
insurance, utilities, and maintenance. The
FmHA will make up the balance as a subsidy
payment. The program will be limited to areas
where rental housing is not feasible as an
alternative. Families will be required to have an
income at least sufficient to pay the
maintenance costs. This authority was recently
granted to FmHA by Congress and will be
implemented in early 1979.
These programs will enable FmHA to assist
families in a wide range of incomes ranging
from above-moderate limits of $20,000 down
to very low-income families receiving HOAP.
The law also provides that the Government will
recover any subsidy granted should the house
be sold or the borrower cease to occupy it.
Section 504 Loans and Grants Program is
designed to assist very low-income owner­occupants
in making repairs to their home to
correct health and safety hazards. There is a
$5,000 limit of total assistance to any family
and the grants are available only to persons 62
years of age or older. The most predominant
use of this program is to bring running water
and install bathrooms in homes. Many of the
elderly and otherwise disadvantaged families
are living in homes that are totally inadequate
for human habitation. The loans have been
averaging about $2,500 and the average grant
has been about the same.
Section 515 Rural Rental Housing Program
makes loans available to individuals, profit or
nonprofit corporations, limited partnerships,
and public bodies to provide rental housing for
SPRING 1979
low- and moderate-income families in rural
areas. The program initially provided housing
only for the elderly; however, we now have the
legal authority, and are making every effort, to
provide rental housing to low-income families
as well.
In many communities, concerned citizens
have seen the need for rental liousing, have
formed a nonprofit corporation, and have
borrowed money from the FmHA to provide
rental units in their own community for their
neighbor ; and friends, both young and old. For
the elderly H .. e units have generally-been one­or
two-bL :f· 1 apartments designed to fit the
individual family ':. needs. The projects are
located close to shopping facilities, and often a
small recreation or community room is
provided within the project for use by the
occupants. Projects range in size from 150
units to a. single duplex.
The section 515 rental program has been
used with the HUD Section 8 deep subsidy
program 2 for several years to provide rental
housing for very low-income families.
Approximately 25,000 units have been
provided in this manner during the past 21!2
years. FmHA also recently implemented its
own rental assistance program and presently
has 23,000 units with this form of deep
subsidy.
Section 523 Self-Help Technical Assistance
Grants are available for families who cannot
afford a home built by the contract method
but are willing to join together and build their
homes with their own labor. The groups
usually consist of six to eight families who,
with the guidance of a construction supervisor,
build their homes. This self-help effort is a
sacrifice on the part of the families; however,
they acquire an immediate sweat equity plus a
pride of ownership in their homes. The grant is
used to fund an organization that provides the
guidance needed in forming groups, informs
the families of the loan requirements, and
supervises the construction. There are currently
52 active grantees in 18 States helping families
2 This HUD program provides a subsidy to families
that enables them to pay the market rental rate. The
family pays 25 percent of its income toward the rental
rate, which includes utilities, and HUD makes up the
difference.
19
to build houses under this method. Each
participating family receives a section 502 loan
to buy the material and to contract for any
skilled work that must be obtained, such as
plumbing or electrical. The grantees are usually
nonprofit corporations; however, a few public
bodies such as housing authorities have
participated in the program.
Section 524 and Section 523 Rural Housing
Site Loans can be made to a nonprofit
corporation or public body to buy land and
install streets and utilities necessary to develop
a desirable subdivision in communities without
available building sites. The developed sites can
be for self-help housing and for other low- and
moderate-income families. We are constantly
reminded that sites are in short supply in the
rural areas. This is one authority that can be
used to alleviate this problem.
Section 514 and Section 516 Farm Labor
Housing Loan and Grant Program can be used
by public bodies and nonprofit corporations to
provide housing for domestic farm workers.
Domestic farm workers are people who make a
substantial portion of their income from work
on farms. This may be for migrant or for
permanent farm workers in an area. There is a
special need in certain parts of the country for
this type of housing, and our current 1979
fiscal-year budget reflects increased funding to
meet these needs.
A GUIDE TO HOUSING REHABILITATION PROGRAMS
This booklet released in August 1978 by the
U.S. Department of Housing and Urban
Development, provides summary information
on the Department's housing rehabilitation
assistance programs. Twenty -two programs are
described, including information on the nature
of the program, eligibility requirements, and
where to get additional information and
application forms. Gppies of the guide may be
obtained from the Office of Neighborhoods,
Voluntary Associations, and Consumer
Protection, Department of Housing and Urban
Development, Washington, D.C. 20410, or by
calling 202/7 55-6996.
THE PRESIDENT'S NATIONAL URBAN POLICY REPORT
The First Biennial Report on National Urban
Policy has been released by the U.S.
Department of Housing and Urban
Development. The report focuses on urban
problems, as well as efforts and issues related
to the development of national urban policy.
The first portions summarize trends in the
distribution of population and economic
activity; housing and community development
problems; and concerns on energy and resource
availability, population, lifestyles, and
employment. The remainder covers urban
policy development issues, including existing
20
efforts and impacts by local, State, and Federal
Governments and the private sector; the
principles, objectives, and strategies which
constitute the urban policy of the Carter
Administration; and recommendations for
changes in existing programs and proposed
program initiatives.
The report, dated August 1978, is available
from Urban Policy Staff, Office of Community
Planning and Development, Room 7144, U.S.
Department of Housing and Urban
Development, Washington, D.C. 20410.
FAMILY ECONOMICS REVIEW
STATUS OF HOUSING IN NONMETROPOLITAN AREAS
by Ronald Bird 1
Current Situation
Housing characteristics. Housing in non­metropolitan
areas2 differs from that in metro­politan
areas in several important respects.
Owner occupancy is more common and single
unit structures are more prevalent in nonmetro
than in metro areas. In 1976, 88 percent of the
occupied units in nonmetro areas were single
units compared with 65 percent in metro areas.
Rental units are more apt to be a single unit
structure; almost two-thirds of all nonmetro
rentals were single unit structures compared
with one-fourth in the metropolitan areas.
Value and rents are only three-fourths as high;
also, in nonmetro areas 1 out of 12 renters paid
no rent, at least in cash, compared with 1 in
100 in metro areas.
Between 197 0 and 197 6, there was a rapid
increase in single -person households in both
areas; the number of single-person households
rose 37 percent in nonmetro areas and 32
percent in metro areas. In nonmetro areas the
increase in single-person households was more
rapid among renters, but in metro areas the
increase was more rapid among owner
occupants. Households with two or more
persons increased 17 percent in nonmetro areas
and 11 percent in metro areas.
Although there has been a vast improvement
in housing conditions in areas in recent years,
housing conditions by almost any measure of
adequacy are poorer in nonmetro than metro
areas. For example, in 1976, only 32 percent
of U.S. households were located in nonmetro
areas, but these areas accounted for 44 percent
of the 5.1 million homes that lacked complete
plumbing or were crowded (more than one
person per room), and 59 percent of the 1.2
1 Leader, Housing Programs; Economics, Statistics,
and Cooperatives Service, USDA. Condensed from a
paper presented at the Food and Agricultural Outlook
Conference in November 1978, at Washington, D.C.
Complete copies are available from the Consumer and
Food Economics Institute (see inside cover of this issue
for address) .
2 Counties which do not include a city of over
50,000 inhabitants .
SPRING 1979
million homes that lacked a complete kitchen.
This incidence of bad housing is closely related
to household income and is highest among the
very poor. For example, 41 percent of the
nonmetropolitan bad housing was occupied by
households with incomes of less than $5,000 in
1976, but households with incomes this low
represented only 24 percent of the total
households. Even among higher income groups,
the incidence of bad housing was relatively
high. Households with incomes of $10,000 or
more occupied 31 percent of the bad housing.
One deterrent to housing improvement since
197 0 has been the rapid rise in housing prices
which has discouraged moves into new housing.
Between 197 0 and 197 6, housing prices in
constant dollars increased 47 percent in
nonmetro areas compared with 27 percent in
metro areas. At the same time, there was a
more rapid rise in incomes of homeowners in
nonmetro areas than in metro areas-7 percent
compared with 1 percent.
Rents have not risen as rapidly as housing
prices. The increase in rents based on constant
dollars was about the same in both
areas-about 8 percent from 1970 to 1976.
Unfortunately, the real incomes of renters
decreased during this time period-about
8 percent in nonmetro areas and 13 percent in
metro areas. The reason for this decrease is
probably due to a shift of more low income
households (especially young households) into
the rental category.
Housing market. Since World War II the
industry has built housing faster than new
households have been formed . The only other
decades before World War II in which housing
starts exceeded new household formations
were the 1890's and the 1920's. This expansion
has resulted in a continuous improvement in
the quality of housing as older, dilapidated
dwellings have been abandoned. In 1950, for
example, 58 percent of the occupied units in
nonmetro areas lacked complete plumbing and
19 percent were crowded. By the fall of 1976
units lacking complete plumbing and those that
were crowded each accounted for 5 percent of
the total.
21
During the 1950's and 1960's, the housing
stock increased more rapidly in the
metropolitan than in the nonmetropolitan
areas. But during the 1970's, the housing stock
increased more rapidly in the nonmetropolitan
areas. In the 1950's about 420,000 units were
built annually; in nonmetro areas, this number
increased to 475,000 annually during the
1960's, and then expanded rapidly to 650,000
units during the 1970's. In 1978, about
700,000 units were produced-about 14
percent higher than in 1977. While the number
of new units added each year is small compared
with the existing housing stock, the cumulative
number of new homes added since 1950 totals
more than 14 million units and represents over
53 percent of the housing stock in nonmetro
areas today.
During the 1970's, 1 out of 4 new homes in
nonmetropolitan areas was a mobile home,
compared with 1 in 12 in the metropolitan
areas. In 1978, about one out of every five new
homes in nonmetro areas was a mobile home.
A major reason for the popularity of the
mobile home is its price, which averaged
$14,000 in 1977 compared with $37,000 for
the conventional dwelling. These prices do not
include the price of the lot; but the price of the
mobile home includes furniture. These homes
are providing housing for many of the
low-income households in nonmetro areas. Of
the 1.5 million mobile homes in nonmetro
areas bought since 1970, half of the purchasers
had incomes less than $10,000 a year. Among
conventional home buyers, only one-fourth
had incomes this low.
Most housing is built or improved by private
citizens contacting their own builders,
negotiating on their own for credit, and setting
up their own repayment schedule with lenders.
Hence, the availability of private credit plays a
major role in determining how many homes are
built or improved in the United States.
Governmental help has played, and is playing,
an important role in helping to improve loan
terms, in establishing loan criteria, and in
helping to direct funds to the needy. The
extent of this help has varied from decade to
decade. During the 1950's, the Federal
Government helped with credit in the
construction of about 24 percent of the units
built in nonmetro areas, during the 1960's
22
about 18 percent, and during the 1970's about
27 percent.
Housing loans made by banks and other
lending institutions but insured or guaranteed
by the Federal Housing Administration or the
Veterans Administration were the most
common type of Federal help to nonmetro
households during the 1950's and 1960's. The
Farmers Home Administration became the
major insurer during the 1970's.
The role of Farmers Home Administration
(FmHA) has changed markedly in the past 30
years. During the 1950's, when FmHA could
make loans only to farmers to improve their
housing, this agency helped in the construction
of about 2,000 units annually. During the
1960's, its program was expanded to include
rural nonfarm households in the open country
and places and towns of less than 5,500
population. As a result, FmHA's financial
assistance helped in the construction of about
16,000 homes annually. And during the
1970's, with increased lending authority and
the adoption of the interest credit subsidies,
the FmHA is helping in the construction of
about 75,000 homes annually. Its current
programs include many types of loans, such as
ownership loans, loans to construct rental
housing, farm labor housing loans, and repair
loans (seep. 17).
Problem Areas
Although families living in rural areas have
never been as well housed as they are today,
there are problems yet to be solved, such as
finding alternative sources of credit, improving
housing for specific population groups (the
blacks, the elderly, and single persons), and
helping families lower or control shelter costs
other . than those needed to purchase or rent a
home, especially energy costs.
Credit needs. For most families, buying a
home is the largest single purchase they will
ever make. And for most home buyers, a large
part of the home purchase price is met by
placing a long-term, amortized mortgage on
their property. When monetary restraints exist,
and mortgage money is relatively scarce, higher
interest rates, larger downpayments, and
shorter terms to maturity are imposed; home
sales decline and home builders cut back on
construction. In 1969 and again in 197 4,
FAMILY ECONOMICS REVIEW
serious slumps in home sales and construction
were attributed to the "credit crunch."
While changes in monetary policy have a
national impact on the supply of home
mortgage funds, there has existed a chronic
deficiency of home mortgage funds in the more
rural sections of the nonmetro areas. This may
partly account for the relatively large number
of high income nonmetro residents living in
inadequate housing. Local banks are the only
accessible source of credit in many rural
counties, and such banks rely primarily on
local deposits from which they try to meet
credit needs of a vast array of borrowers.
Under such circumstances banks invest only a
limited amount of their funds in long-term
housing loans-usually about 20 percent.
Nationally, savings and loan (S&L)
associations make about half of all housing
loans for single-family homes and offer
somewhat more favorable credit terms than do
many other lenders. However, this source of
credit is not yet available to many rural people.
Of the 865 most rural counties in the
nonmetro areas, 805 do not have an S&L
operating within their borders.
The Farmers Home Administration (FmHA)
is designed to help close this gap in home
mortgage credit in designated rural areas, but
FmHA activities would have to be greatly
expanded in the more rural counties if available
housing credit were to be equalized between
the larger metropolitan counties and the more
rural counties. In 197 5, outstanding housing
loans of commercial banks, savings and loan
associations, and the FmHA averaged $498 per
capita in the most rural counties of the
nonmetro areas compared with $1,490 per
capita in the larger metropolitan counties.
Much of this difference can be credited to the
lack of savings and loan association loans in
many rural counties. Outstanding S&L's
housing loans on single-family homes averaged
only $49 per capita in the most rural counties
compared with $1,213 in the larger
metropolitan counties. Bank lending showed a
comparatively smaller difference- $280 in the
rural counties and $371 in the larger
metropolitan counties. Some of this difference
is due to lower incomes and lower prices of
housing in nonmetro compared with metro
areas.
SPRING 1979
FmHA loans are covering part of this rural
credit gap. Outstanding FmHA loans per capita
on single-family units were $169 in the most
rural counties and only $7 in the larger
metropolitan counties in 1975. In the rural
counties, FmHA held 34 percent of the
housing loans.
A gradual expansion of S&L's lending
activities coupled with an expanding lending
program of FmHA to low- and
moderate-income families is bringing about
some improvement. However, there still
remains a long way to go before home
mortgage credit is as accessible in the more
rural areas as it is in more urban areas.
Housing problems of special population
groups. Not all groups have shared equitably in
the housing improvements of the 1970's.
Groups for which progress has lagged include
blacks, th~ elderly, and the single-person
households. Blacks occupied 27 percent of the
housing that lacked complete plumbing or was
crowded in nonmetro areas in 197 6, up from
20 percent in 1970. But blacks occupied only
7 percent of all nonmetro housing in both
1970 and 1976.
Among the elderly or the single-person
household, crowding is not a problem.
However, in 1976 the elderly occupied 35
percent of the units that lacked complete
plumbing compared with 32 percent in 1970.
Single-person households-many of whom are
elderly-occupied 36 percent of the housing
that lacked complete plumbing in 1976, well
above the 26 percent in 1970. The rapid
increase in young, single-person households,
many of whom have low incomes, has
contributed to the greater prominence of poor
housing among single-person households.
Reasons for the lag in the improvement in
housing for these groups are many. The
relatively low level of income is no doubt a
major factor. But their limited access to credit,
again partly due to their limited income, is of
considerable importance. An analysis of the
1976 Annual Housing Survey data shows that
only 3 percent of all rural households having
conventional mortgages were black, but among
those mortgages insured by the Federal
Housing Administration, 8 percent were held
by black households, and among those
financed with assistance from the Farmers
23
Home Administration, 11 percent were held by
blacks.
costs. Despite these efforts, the rising energy
costs pose a problem of growing importance in
the Nation's efforts to provide more adequate
housing in nonmetropolitan areas.
Impact of rising energy costs. Rents and
mortgage payments are becoming a smaller part
of outlays for shelter, while heating, cooling,
water, waste disposal, taxes, and a multitude of
other costs are rising rapidly. Current programs
exist to help a household gain access to suitable
housing, but the occupants now face greater
difficulties in meeting these other bills. Efforts
to conserve energy through weatherization of
housing and developing alternative energy
sources such as solar energy are means being
used to minimize the impact of rising energy
Sources: Spurlock, H. H. , and Bird, R., 197 8,
Housing credit : A rural-urban comparison, Rural
Development Research Report No. 6,_ U.S. Department
of Agriculture, Economics, Statistics, and Cooperatives
Service. U.S. Department of Commerce, Construction
Reviews, 1970 through 1978. U.S. Department of
Commerce and U.S. Department of Housing and Urban
Development, 1978, tapes from the 1976 Annual
Housing Survey.
SOME NEW USDA PUBLICATIONS
(Please give your ZIP code in your return address when you order these)
The following are for sale by the Superintendent of Documents, U.S. Government Printing
Office, Washington, D.C. 20402:
• BUYING FOOD-A GUIDE FOR CALCULATING AMOUNTS TO BUY AND COMPARING
COSTS IN HOUSEHOLD QUANTITIES. HERR 42 (Supersedes HERR 37). July 1978.
$2.20.
• LIST OF AVAILABLE PUBLICATIONS OF THE UNITED STATES DEPARTMENT OF
AGRICULTURE. List 11. March 1978. $2.50.
Single copies of the following are available free from the U.S. Department of Agriculture. Please
address your request to the office indicated:
From Office of Governmental and Public Affairs, Washington, D.C. 20250:
• BETTER LAWNS-ESTABLISHMENT, MAINTENANCE, RENOVATION, LAWN
PROBLEMS, GRASSES. G 51. Revised April 1978.
• GROWING VEGETABLES IN THE HOME GARDEN. G 202. Revised June 1978.
From Economics, Statistics, and Cooperatives Service, Publications Unit, Room 0054, South
Building, Washington, D.C. 20250:
• FOOD STAMP REDEMPTIONS: THEIR IMPACT ON FOOD SALES BY REGION, SIZE,
AND KIND OF PARTICIPATING FOOD STORES-FISCAL 1976. AER 410. August
1978.
• BALANCE SHEET OF THE FARMING SECTOR, 1978. AlB 416, Supplement No.1.
October 1978.
• FARM POPULATION ESTIMATES FOR 1977. RDRR 4. September 1978.
From Food and Nutrition Service, Information Division, Washington, D.C. 20250:
• SCHOOL BREAKFAST MENU PLANNING GUIDE. FNS 7. Revised September 1978.
County Extension Staff: When ordering publications, use Extension Publications Shipping Order Form ES-91A and
follow instructions from your State Publications Distribution Officer.
24 FAMILY ECONOMICS REVIEW
THREE BUDGETS FOR A RETIRED COUPLE, AUTUMN 1977
The Bureau of Labor Statistics, U.S.
Department of Labor, has updated to autumn
1977 its three hypothetical annual budgets for
a retired couple and related area indexes tha~
can be used to compare the cost of these
budgets in selected urban areas. This updating
reflects changes in prices between autumn
1976 and autumn 1977.
In the autumn of 1977 , the estimated U.S.
average annual cost of the lower level budget
for an urban retired couple, excluding personal
income taxes, amounted to $5,031. At the
intermediate and higher levels, the budget costs
amounted to $7,198 and $10,711, respectively.
Costs for all the budgets are about 7.0 percent
greater than the estimated budget costs for the
autumn of 197 6. The costs of the budgets are
generally lowest in nonmetropolitan areas and
in the southeastern cities and highest in
Anchorage, Honolulu, and northeastern and
western cities.
The increase in the food component from
autumn 1976 to autumn 1977 was about 6.3
percent at each budget level, compared with an
increase of 1 percent or less a year earlier.
Medical care costs rose the most­approximately
10 percent for each budget
level. The increase in housing costs ranged from
8.2 percent at the lower budget level to 7.7
percent at the higher budget level.
Transportation costs increased about 4. 7
percent for each budget level, corripared with a
9 percent rise a year earlier when
transportation was the fastest rising budget
component.
The updated budget costs represent the costs
at autumn 1977 prices of three hypothetical
lists of goods and services that were specified in
the mid-1960's to portray three relative levels
of living--simply termed lower, intermediate,
and higher-for a retired couple. The cost of
the lower budget is not intended to represent
the income necessary for subsistence at the
poverty level, but simply represents a level
relatively lower than the intermediate budget.
Summary of annual budgets for a retired couple at 3 levels of living, urban .
United States, autumn 1977
Component
Total budget 1 .................. .
Total family consumption ..... .
Food ..•.........•...........
Housing ..•.........•........
Transportation .•............
Clothing ................... .
Personal care .............. .
Medical care2 .............. .
Other family consumption ... .
Other items
Lower
budget
$5,031
4,815
1,535
1,745
337
214
146
628
209
217
Intermediate
budget
$7,198
6,765
2,035
2,518
658
360
214
632
347
433
Higher
budget
$10,711
9,898
2,554
3,936
1,215
555
313
637
687
813
!Beginning with the autumn 1973 updating of the budgets for a retired
couple, the total budget is defined as the sum of "total family consumption"
and "other items." Income taxes are not included in the total budgets.
2The autumn 1977 cost estimates for medical care contain a preliminary
estimate for "out-of-pocket" costs for Medicare.
Note: Because of rounding, sums of individual items may not equal totals.
Source: U.S. Department of Labor, Bureau of Labor Statistics, 1978,
Three budgets for a retired couple, autumn 1977, News, USDL 78-698.
SPRING 1979 25
!>:) en
~ -:>;:: t"'
><
t<:l
Cl
0 z
0 -:;:: Cl r:n
::0
t<:l
<....:..
t<:l :a
Cost of food at home estimated for food plans at 4 cost levels, December 1978, U.S. average 1
Sex-age groups
FAMILIES
Family of 2: 3
20-54 years ............ .
55 years and over .•.....
Family of 4:
Couple, 20-54 years and
children--
1-2 and 3-5 years
6-8 and 9-11 years
INDIVIDUALS 4
Child:
7 months to 1 year ..... .
1-2 years .............. .
3-5 years .............. .
6-8 years •........•.....
9-11 years ............. .
Male:
12-14 years ............ .
15-19 years ............ .
20-54 years ....•........
55 years and over ...... .
Female:
12-19 years ............ .
20-54 years ............ .
55 years and over ...... .
Pregnant ..........••....
Nursing ................ .
Thrifty
plan2
26.40
23.60
37.30
44.80
5.30
6.00
7.30
9.20
11.60
12.40
13.60
13.20
11.70
11.10
10.80
9.80
13.60
14.40
Cost for 1 week
Low-cost
plan
Moderate­cost
plan
Dollars
34.40
30.60
48.00
57.90
6.40
7.60
9.10
11.80
14.80
15.70
17.40
17.30
15.20
14.10
14.00
12.60
17.30
18.40
43.20
37.90
60.00
72.70
7.90
9.40
11.30
14.80
18.60
19.70
21.90
21.80
18.90
17.50
17.50
15.60
21.30
22.80
Liberal
plan
51.70
45.20
71.70
87.00
9.30
11.20
13.50
17.80
22.20
23.60
26.20
26.20
22.70
20.80
20.80
18.40
25.30
27.10
Thrifty
plan2
114.50
102.60
161.50
194.30
23.00
26.00
31.40
40.00
5(1 . 20
53.60
59.10
57.30
50.90
47.90
46.80
42.40
58.80
62.50
Cost for 1 month
Low-cost
plan
Moderate­cost
plan
Dollars
149.30
132.80
208.10
251.00
27.90
33.00
39.40
51.30
64.00
68.20
75.60
74.90
66.00
61.10
60.80
54.70
75.10
79.70
187.10
164.60
259.70
314.90
34.20
40.80
48.80
64.30
80.50
85.40
94.70
94.50
82.10
75.70
75.60
67.50
92.30
99.00
Liberal
plan
224.10
196.20
310.80
376.80
40.30
48.40
58.70
76.90
96.20
102.10
113.70
113.60
98.50
90.10
90.10
79.90
109.50
117.40
1Assumes that food for all meals and snacks is purchased at the store and prepared at home. Estimates for each plan
were computed from quantities of foods published in the Winter 1976 (thrifty plan) and Winter 1975 (low-cost, moderate­cost,
and liberal plans) issues of Family Economics Review. The costs of the food plans were first estimated using
prices paid in 1965-66 by households from USDA's Household Food Consumption Survey with food costs at 4 selected levels.
USDA updates these survey prices to estimate the current costs for the food plans using information from the Bureau of
Labor Statistics' "Estimated Retail Food Prices by Cities" from 1965-66 to 1977 and "CPI Detailed Report," tables 3
and 9, after 1977.
2coupon allotment in the Food Stamp Program based on this food plan.
310 percent added for family size adjustment. See footnote 4.
4The costs given are for individuals in 4-person families . For individuals in other size families, the following
adjustments are suggested: 1-person--add 20 percent; 2-person--add 10 percent; 3-person--add 5 percent; 5-or-6-person-­subtract
5 percent; 7-or-more-person--subtract 10 percent.
n
0
tn
-1
0..,,
0
0 c
l>
-1
J:
0 s m
CONSUMER PRICES
Consumer Price Index for all urban consumers
Group
All items ................... .
Food ......................•
Food at home ............ .
Food away from home ..... .
Housing ................ : . . .
Shelter ................. .
Rent .................. .
Homeownership ......... .
Fuel and other utilities .
Fuel oil, coal, and
bottled gas .......... .
Gas (piped) and
electricity .......... .
Household furnishings
and operation .......... .
Apparel and upkeep ........ .
Men's and boys' apparel ..
Women's and girls' apparel
Footwear ...•.............
Transportation .•...........
Private ................. .
Public .................. .
Medical care .........•.....
Entertainment ............. .
Other goods and services .. .
Personal care ....•.......
( 1967 = 100)
Dec.
1978
202. 9
219.4
217.9
227.4
211.5
221.0
169.5
239.5
219.9
311.8
236.2
184.0
163.2
160.2
151.7
169.6
192.6
192.5
189.1
227.8
180.9
189.1
187.3
Nov.
1978
202.0
217.8
216.1
225.9
210.6
220.1
168.5
238.8
218.5
306.1
234.9
183.0
164.1
160.1
154.1
169.1
191.4
191.1
189.7
227.0
179.5
188.8
186.8
Oct.
1978
200.9
216.8
215.4
224.6
209.5
218.6
167.4
237.0
220.1
300.1
240.0
181.9
163.3
159.1
154.0
167.8
189.7
189.4
189.3
224.7
179.3
188.3
185.6
Source: U.S. Department of Labor, Bureau of Labor Statistics.
CHARACTERISTICS OF NEW HOUSING
Dec.
1977
186.1
196.3
193.7
206.2
195.7
198.2
157.9
213.0
207.6
291.9
218.9
181.1
158.2
157.8
150.4
159.6
178.8
178.0
185.7
209.3
162.7
176.3
According to a report released jointly by the
Bureau of the Census of the U.S. Department
of Commerce and the U.S. Department of
Housing and Urban Development, new
one-family houses completed in 1977 tended
to be larger and contained more amenities than
those completed in 1976. More of the houses
completed in 1977 had 1,600 or more square
feet of living area, central air-conditioning, two
or more bathrooms, and at least one fireplace.
The report, released in August 1978, also
includes data on the characteristics of
single-family and multifamily houses
completed, single-family houses sold, and
contractor-built houses started.
SPRING 1979
Source : U.S. Department of Commerce, Bureau of
the Census, 1978, Characteristics of new housing :
1977, Construction Reports, Series C25-77-13.
27
FAMILY ECONOMICS REVIEW
SPRING 1979
Contents
ENERGY CONSUMPTION FOR TEXTILES AND APPAREL
Annette Polyzou
THE FOOD PRICE OUTLOOK FOR 1979
J. B. Penn
THE OUTLOOK FOR HOUSING IN 1979
Robert J. Sheehan
Page
3
10
14
FARMERS HOME ADMINISTRATION RURAL HOUSING PROGRAMS . . . . . . . . . . . 17
L. D. Elwell
A GUIDE TO HOUSING REHABILITATION PROGRAMS. . . . . . . . . . . . . . . . . . . . . 20
THE PRESIDENT'S NATIONAL URBAN POLICY REPORT . . . . . . . . . . . . . . . . . . . 20
STATUS OF HOUSING IN NONMETROPOLITAN AREAS . . . . . . . . . . . . . . . . . . . . 21
Ronald Bird
THREE BUDGETS FOR A RETIRED COUPLE, AUTUMN 1977................. 25
CHARACTERISTICS OF NEW HOUSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Regular Features
SOME NEW USDA PUBLICATIONS 0 • 0 • 0. 0 •• 0 0. 0 0 • 0 • 0 • ••••••••• 0 ••••••• 24
COST OF FOOD AT HOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
CONSUMER PRICES ••• 0. 0 • 0 •• 0 • 0 •• 0 • ••• 0 •••••••••• 0 •• 0 • ••••••• 0 • 0
*****
Trade names are used in this publication solely for the
purpose of providing specific information. Mention of a trade
name does not constitute a guarantee or warranty of the product
by the U.S. Department of Agriculture or an endorsement by the
Department over other products not mentioned. /
*****
27
-trU.S. GOVERNMENT PRINTING OFFICE, 1979 0-624-776'1137 REGION 3-1 Issued March 1979
28 FAMILY ECONOMICS REVIEW