Timberland market indicators

• U.S. housing starts increased 7% from last quarter and 3% above a year ago. Q4 U.S. housing starts (SAAR) averaged 1.45 million units, the highest quarterly average level since Q3 2022.
• Easing inflation and mortgage rates have given a boost to builder sentiment and homebuyer demand.
• Singe-family permits, an indicator of future wood product demand, at 994,000 (SAAR) for December were up 1.7% from November and up more than 30% from a year ago, reflecting the increased optimism of home builders.²
• North American wood product manufacturers continue to be cautious in the current environment and are closely monitoring inventories and production.
  
• U.S. lumber prices moved lower toward the end of 2023, with the benchmark Random Lengths Framing Lumber Composite price averaging $384/MBF in Q4, the lowest level since Q4 2019.

• Australia dwelling approvals increased 5.6% from the prior quarter, with multifamily housing driving overall dwelling approvals higher. Single-family approvals rose slightly, up 2% from the prior quarter, while multifamily approvals rising 12%.
• The outlook for dwelling approvals remains mixed. Despite increased population growth boosting the need for housing, high home prices, mortgage rates, and continued elevated inflation are affecting affordability and slowing new home demand. 
• In September 2023, the Australian parliament passed the AUD 10 billion Housing Australia Future Fund, which aims to build 30,000 new affordable homes over the next five years. This funding, along with additional stimulus targeted toward several states and territories aimed to increase housing supply, is expected to generate a boost in construction demand.³
• Softwood structural lumber prices remained flat near historic highs at the end of 2023.  
• Softwood stumpage prices, available on a semiannual basis, increased 3% in the first six months of 2023 over the last half of 2022, reflective of tight supply despite lower demand.

• Softwood stumpage prices were flat to slightly lower on average in the U.S. South as domestic forest product manufacturing demand slowed in response to softness in residential construction.
• U.S. Pacific Northwest stumpage prices fell -8.5%, on average across the region, as mills slowed their orders and delivered log prices softened overall harvest demand, while costs of production remained above historical averages.
• New Zealand USD stumpage prices increased 26% during Q4 from the recent low in Q2 2023, with New Zealand maintaining its position as the largest softwood log importer into China.  
• Australia softwood stumpage prices, in USD, increased 4% in H1 2023 compared with H2 2022. A limited supply of merchantable inventory to supply structural grade lumber demand is maintaining upward pressure on stumpage prices. Data for H2 2023 was not available at the time of publication. 

• Q4 U.S. timberland cash yields improved by 31 basis points (bps) from Q3, to a value-weighted 2.29% across the United States.
• Driving cash yields in the United States in Q4 were increases in harvest volumes in the Pacific Northwest compared with Q3, despite overall average stumpage price declines in the region.
• Historically, Q4 cash yields have averaged 2.47% over the past five years, with Q4 2023 cash yields now on par with Q4 2022, and 20bps below the quarterly average. 

• The spread between privately held and publicly traded timberland in the U.S. South widened in Q4, as privately held timberland values continued to rise, while publicly traded timberland values softened.
• The value of privately held timberland in the U.S. South (as reporeted by NCREIF) reflected strong comparable sales that boosted appraisals within the benchmark. U.S. South private timberland values increased 3.5% on average in Q4, a 6.4% increase over average values seen in Q4 2022.
• U.S. South timberland values held by publicly traded companies (as measured by the Timberland Enterprise Value per Southern Equivalent Acre) decreased 3% from last quarter, although 1% higher than values one year ago. 
• Publicly traded timberland values reflected weak Q4 demand and pricing for forest products, and broader weakness in equity markets seen during the quarter.

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