I recall a young adult chapter book from my youth (late 1970s-early 1980s) about a boy with a magic pencil. It is used like a regular pencil, but it might have been blue lead. Like a regular pencil, it needs to be sharpened, and gets slightly smaller each time. I can’t recall the things he made or did with it. Some dramatic emergency with the last bit of pencil. Apologies but that’s all I remember.
Any chance it’s The Magical Drawings of Moony B. Finch by David M. McPhail, 1978? I first saw it in Cricket Magazine. There’s at least one sequel.
This may be Mostly Magic by Ruth Chew. It included a plot line about a magic pencil and did mention sharpening it.
I’m looking for something similar. I remember the boy drawing a playhouse with a porch and he and his sister being able to step into it. Ring a bell?