Aunt Fanny Asks About Timber REITs and Housing Markets

Aunt Fanny called the other day at 4:14 a.m. to tell me about her growing timberland portfolio and to remind me that, “Nephew, you earn more if you learn more!” She also had questions about timberland investments and housing markets, and wanted to share news about her book on timberland investing…

Housing Markets

“Nephew, what’s going on with housing markets? No houses mean no lumber and no demand for my trees!”

“Well, it just so happens I was reading a summary from the Forisk Research Quarterly last night on this,” I said, reaching over for a sheaf of papers on my nightstand. “Okay if I read from the page?”

“Please do!” said Aunt Fanny.

In 2014, total housing starts increased 8.0% over 2013. For 2015, Forisk projects growth of 12.1% over 2014. Overall, Forisk projects 2015 housing starts of 1.12 million, up 0.7% from 1.11 million as of July 2015. Forisk’s 2015 Base Case peaks at 1.56 million housing starts in 2019 before returning to a long-term trend approaching 1.51 million.

Forisk Research Quarterly (FRQ) Q4 2015 U.S. Housing Starts Outlook, Base Case

“Well that sounds like things are going in the right direction,” said Aunt Fanny.

“Yes, Ma’am,” I responded.

Timber REITs

“Nephew, what about the big guys? What’s going on with those timberland-owning real estate investment trusts?”

This is when I had to stay on my toes with these early morning Aunt Fanny calls. Her years of experience in banking would sneak up on me. She understands finance and investments with the best of them. “Well, they’ve had a tougher year because housing has been slow,” I said.

“Got any research to share on these firms?” asked Aunt Fanny. I could practically hear her taking notes on the other end of the phone.

“Yes I do,” I said, reading from the page…

Through Q3 2015, all five public timber REITs traded at prices below where they started the year on January 1. In 2014, the Forisk Timber REIT Index showed positive returns because Weyerhaeuser, the only firm with meaningful positive stock price appreciation that year, accounts for 57% of the timber REIT sector. However, share prices through Q3 2015 highlight the exposure of the sector to modest recovery rates in housing and lumber. Through Q3 2015, the sector generated returns of -18.8%. The question for investors remains, “is this a buying opportunity?” Are current prices a Halloween trick or a treat?

2015 Public Timber REIT Share Price Performance Thru Q3

“Nephew, what do you think? Trick or treat?” asked Aunt Fanny.

“I think there might be a few buying opportunities out there,” I said, cautiously…

Aunt Fanny Publishes a Book on Timberland Investing

“You pick up your mail yesterday?” asked Aunt Fanny, changing gears.

“No, Ma’am,” I responded while standing up.

“Didn’t think so,” said Aunt Fanny. “Well thanks for answering my questions!” Then she hung up.

Curious, I pulled on a pair of jeans and sweatshirt to walk outside. Inside the mailbox, I found a padded envelope. Back in the house, I started the coffee pot and sat down at the kitchen table. Inside the envelope was a book with a yellow sticky note. The sticky note included a message in Aunt Fanny’s clear handwriting that said:

Behold my book, Nephew!
And thanks for letting me take your picture.
Love, Aunt Fanny

The book, “Aunt Fanny Learns Forestry: Managing Timberland as an Investment”, featured a picture of her forest on the cover and a picture of me on the back walking through the woods. How’d she get that photo? Once again, Aunt Fanny caught me by surprise…