Timber REITs: Renewable Profits?
Timber REITs have seen signs of rejuvenation in 2019, powered by the recovery in the single-family housing markets, which has sprung back to life over the last six months.
The roller-coaster ride for lumber prices continued into the second half of this year. After hitting record highs in May 2018, prices plunged 50% through May 2019.
Since bottoming in 2019, however, lumber prices have recovered more than 25% as the monthly rate of housing starts and new home sales hit 12-year highs this summer.
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.
Oversupply remains an issue in both the Southeast and Pacific Northwest. The use of biomass as a fuel source remains a wildcard. We see superior long-term value in the vertically integrated REITs.