U.S. South sawtimber inventory overhang update

Given what has been a muted housing recovery since the Great Recession, we decided to revisit our original analysis from 2017 concerning elevated sawtimber inventories in the U.S. South. While aggregate growth in housing starts over the last few years has resulted in an improved balance between sawtimber growth and harvest for lumber production in the U.S. South (please refer to the “Sawtimber Inventories Elevated, but Poised to Decline” section below), individual markets across the U.S. South appear to continue to build inventory given weaker sawtimber demand. Overall, our revised analysis extends the time it will take for sawtimber inventories to come into balance by three to four years, primarily due to existing housing conditions and a more conservative near-term housing starts forecast (our current near term housing starts forecast is down ~5-10% versus our prior forecast). However, we should note that this reflects our analysis for the U.S. South broadly, and point out that there are several micro markets in this region that are already close to being in balance if not starting to show signs of constrained supply.