• Alex Pettee, CFA

Timber REITs: Upside As Shortages Ease

  • How Hot is Too Hot? For Timber REITs, scorching-hot lumber demand from the resurgent housing industry - combined with sawmill production bottlenecks - sent lumber prices soaring to extreme levels.

  • Inflating construction materials prices - and the outright inability to source necessary goods - forced home builders to delay projects and put many smaller-scale "do-it-yourself" renovation projects on hold.

  • Victims of their own success? Despite reporting the fastest revenue growth of any REIT sector in early 2021, timber REITs have been the weakest-performing property sector as lumber prices slump.

  • Recent commentary indicates that bottlenecks are slowly-but-surely beginning to ease - due in no small part to record lumber production from WY and PCH - which is good news for these REITs and the broader housing industry.

  • Valuations and fundamentals appear compelling amid historic levels of demographic-driven housing demand and record-low housing supply, but investors must be able to tolerate elevated volatility and value inflation-hedging attributes.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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