Timber Prices

November 2013-Mississippi Timber Markets Holding Up

November 2013

Mississippi Timber Markets Holding Up

by Dr. James Henderson, Extension Forestry

Mississippi stumpage prices for the 3rd quarter of 2013, as reported by Timber Mart-South, indicated increases for most product categories. Pine sawtimber increased 1.8%, mixed hardwood sawtimber increased 11.2%, and hardwood pulpwood increased 4.6%. Both pine chip-n-saw and pulpwood decreased by 5.2% and 2.7%, respectively. The full price report is available at msucares.com/forestry/prices and in The Overstory newsletter. You can also contact your local county MSU Extension Service office to obtain a copy.

This time last year the average 30-year fixed rate mortgage was about 3.4%. That rate increased by a full percentage point over the summer and into the fall and is now at about 4.2%. New home construction was certainly impacted by that recent spike in home mortgage rates (see figure); however, the expectation is for continued growth in the housing sector as the overall economy continues to show improvement and the past several years of suppressed demand for housing responds to the growing economy. The trend remains positive as housing starts are 19% higher than this time last year. Existing and new home sales are also on an upward trend showing an increase from this time last year of 11% and 13%, respectively. The latest data on the supply of homes for sale indicates an increase to a 5.1 month supply in August from a 3.7 month supply in April. Again, the impact of the recent spike in mortgage interest rates cooled the housing market somewhat; however, the inventories are still below the 6 month supply level considered to be indicative of a healthy housing market.

The current stimulus policy of the Federal Reserve Bank and the pending potential shifts in policy are issues that timber producers should be aware. Since 2008 the Fed has been buying Treasury bonds and mortgage-backed securities in the amount of $3 trillion in an effort to stimulate the economy. This policy has infused banks with money to offer more home mortgages and it has helped to keep mortgage rates low. If that policy were to end, the housing recovery would likely cool considerably. In fact, the discussion by the Fed of tapering the stimulus policy is credited for driving interest rates up this past summer. A potential policy shift is approaching. Ben Bernanke is departing as Chairman of the Federal Reserve and Janet Yellen, the current Vice Chair, is President Obama's nominated replacement. The transition of the Federal Reserve Chairman and any policy shifts represents a pivotal moment in the U.S. housing and economic recovery. Looking long-term at the recovery of Mississippi's timber markets, the policy of the Federal Reserve under the leadership of a new chairman will obviously have major implications for the magnitude and success of that recovery.