The timber industry and sector-related exchange traded funds have been rebounding as lumber prices rallied this year.

The iShares Global Timber & Forestry ETF (WOOD) increased 6.1% over the past month and the Invesco MSCI Global Timber ETF (CUT) gained 6.3%.

WOOD YTD Performance

Meanwhile, lumber futures jumped 24% so far in November, rising to about $617 per thousand board feet after falling off from the record $1,000 this summer during the pandemic-induced buyout.

“By any historical standards, this is just incredibly strong pricing,” Devin Stockfish, chief executive of Weyerhaeuser Co., which owns mills and is the country’s largest private timberland owner, told the Wall Street Journal.

Stockfish pointed out that wood inventories have declined throughout the lumber supply chain, whereas demand from builders and home remodelers remains strong as they try to meet the surge in new home demand.

”We’re going to see some seasonal slowdown,” Stockfish said, “but our expectation is that the builders are going to continue to build as much as possible until winter weather really starts restricting building activity.”

The mild autumn has been especially accommodative for builders in the South where demand from job sites and from restocking lumber dealers and distributors supported prices for southern yellow pine.

Single-Family Houses Are Booming

Single-family housing starts, a measure of home construction, gained in October for the fifth straight month to its highest level since 2007, rising 6.4% over September to a seasonally adjusted annual rate of 1.179 million, according to the U.S. Census Bureau.

“In the pandemic, nothing has been more surprising—positively surprising—than single-family housing,” Mark Zandi, chief economist at Moody’s Analytics, told the Wall Street Journal. As more Americans are working remotely, “this is a fundamental shift in underlying housing preferences.”

Some families are exiting large cities in response to Covid-19 and the new work-at-home environment. Consequently, more are willing to move out to single-family homes in the suburbs despite a troubled job market and soaring home prices.

Furthermore, home buyers also enjoy mortgage rates that are now at their lowest level since Freddie Mac began tracking them in 1971, which could further support sales momentum into next year.

“In 32 years, the best market I have ever seen,” D.R. Horton Inc. CEO David Auld told investors last week. “And it does feel sustainable, unlike what was a false demand in the last big upcycle.”

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