Alex Pettee, CFA
Timber REITs: Can't Ignore This Growth Sector
Timber REITs are the newest addition to our coverage universe. Timber REITs own 20 million acres of timberlands, more land than the five smallest states in the US combined.
Timber REITs are the link connecting the commercial real estate sector to the residential homebuilding sector. Residential construction is responsible for roughly half of wood product consumption in the US.
Last year’s slowdown in the single family housing market took its toll on lumber prices and Timber REITs, which were the worst-performing real estate sector of 2018.
Lumber prices peaked in May 2018 on supply shortages in the Pacific Northwest and the ongoing softwood lumber dispute with Canada. Prices have plunged 40% since last Spring.
Long-term fundamentals look strong for the timber REIT and broader housing sectors, powered by demographic trends that suggest a revival of the suburbs and single family housing in the 2020s.
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