New Home Construction Has Timberland Prices Trending Upward

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”.

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