Timber REITs: Renewable Profits?

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• 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.

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