July 15, 2016 (Chicago) – July 15, 2016 (Chicago) – REALTORS® Land Institute member Bob King, ALC, Owner/Broker, United Country Land & Lifestyle Realty in Anderson, South Carolina, stated that “Timberland prices will be trending upward as an increase in new home construction drives up softwood sawtimber prices. Timberland prices will also be rising as more recreational land buyers come back into the market.”
The timberland market is tied strongly with new home construction. Since much of the commercial timberland acreage in the U.S. is dedicated to growing softwood sawtimber, overall returns for the timberland asset class is tied strongly to softwood sawtimber prices. These softwood sawtimber prices are tied strongly to new home construction. Since the new home construction market crashed in 2008, we have seen southern pine sawtimber prices drop about 40%. However, the new home construction market is on a slow but sure turnaround.
To meet the demand for new homes over the last fifty years, builders in the U.S. have constructed an average of 1.5 million homes per year. In the eight-year period preceding the recession, a large oversupply of homes was constructed. However, since 2008 the number of new homes being built has been so low that we could find ourselves in a new home shortage unless construction picks up substantially.
King pointed out that “In 2014, the U.S. only built 1 million new homes. In 2015, we built 1.1 million and the National Associations of REALTORS® predicts that we will build 1.3 million new homes in 2016. This is still far below the 1.5 million annual average that was necessary to meet demand over the last fifty years. It will probably be 2018 before we make it back to the long term average of 1.5 million”.
Even though the turnaround in the new home construction market is happening slowly, the trend is definitely upward and softwood timber prices will improve. King predicts that “As timber prices improve, and also as the recreational buyers continue to come back into the land market with the improvement in the economy, we will see timberland prices trend upward”.
About the Realtors® Land Institute
The Realtors® Land Institute, an affiliate of the National Association of Realtors®, is the prestigious, higher learning professional membership organization for practitioners who specialize in land real estate transactions. Over 100 years old, the Institute provides a wide range of programs and services that build knowledge, relationships, and business opportunities for the best in the land business. The REALTORS® Land Institute (RLI) provides the education, tools, services, advice and networking opportunities that are the foundation for all land professionals to become the best in the business—to become an Accredited Land Consultant (ALC). For more information, visit rliland.com or call 800.441.5263.