Timber REITs: Literally On Fire
One of the best-performing REIT sectors this year, Timber REITs have nearly doubled since their mid-pandemic lows in March, reignited by a rejuvenation in the suddenly red-hot U.S. housing market.
Housing has proven to be the "ultimate essential service." Households have exhibited a propensity to prioritize housing-related payments and investments in home improvement and living situation upgrades amid the pandemic.
Lumber prices have soared to record-highs from the combination of insatiable demand and reduced supply resulting from pandemic-related production shutdowns and forest fires raging in the Pacific Northwest.
Timber REITs were caught off-guard by the velocity of the rebound in lumber demand from single-family homebuilding and remodeling activity and have struggled to meet customer demand.
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.