The Timber Industry and Its Relationship with REITs

Steve Sage - Author

Jan. 12 2016, Updated 9:16 a.m. ET

The impact of the timber industry on REITs

The timber industry and its products have been an integral part of the US manufacturing base and state economies. The industry employs over 80,000 workers across the United States. US lumber production has an enormous impact on single-family homes and has a long relationship with the housing market.

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Relationship between timber and housing market

The timber market is highly correlated with the housing market. US timber and lumber sales fell during the 2008 housing bubble collapse. The average price of new homes during the crisis was $225,200. Prices rose significantly, to $305,000, in 2015.

The graph above shows the relationship between timber and housing prices over the years.

Industry statistics

  • of the United States’ total area of 2.2 billion acres, forest covers 747 million acres
  • wood volume is 25% greater than it was 40 years ago
  • annual US forest growth has consistently outperformed harvest since 1940
  • Over $100 million has been spent on wildlife and environmental research
  • the industry provides employment to over 1.4 billion people and makes products worth more than $200 billion annually

The above points outline the nature of the industry and its determination to grow. To gain exposure to REITs Weyerhaeuser (WY), Plum Creek Timber (PCL), Rayonier (RYN), and Potlatch (PCH), you could invest in the iShares Dow Jones US Real Estate ETF (IYR). The four companies constitute 3.6% of the total 25.1% held by specialized REITs.


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