Wednesday, April 10, 2013

Timber's Rebound

Increasing demand and low supply, which has benefited a variety of real estate asset classes, has now moved to timber.   Lumber prices are approaching housing bubble prices, and Calculated Risk has insight:
Demand for lumber is increasing, but demand is still far below the levels during the housing bubble. However supply is lower than during the bubble years too. There are several factors impacting supply including a large number of sawmills still idled (it takes time to restart), the impact of the Mountain pine beetle, reduced maximum cuts in parts of Canada, and the permanent closure of high cost mills.
This price increase is before home builders really start construction to meet housing demand.  I plan to follow timber prices as home building returns to historic levels.   Here is a Calculated Risk graph of lumber prices going back to 2004:

I can think of a beleaguered non-traded REIT sponsor that could use some good news, and tangible positive results, for its timber REIT.

1 comment:

Anonymous said...

Stumpage prices are not always linearly related to lumber prices. There has been been significant saw timber supply sitting on the sidelines the last 4 years. Significant rise in stumpage prices will quickly mobilize this commodity.