Lumber Futures and Timberland Investment
by Sherwood Clements, Alan J. Ziobrowski, and Mark Holder,
published in the Journal of Real Estate Research
The objectives of The Appraisers Research Foundation (TARF) are to facilitate the research, testing and report development of new methodologies, techniques or procedures to best serve the publics who use, own or control property interests. TARF does not warrant or express an opinion of the analysis or conclusions expressed in the research articles found on the TARF website. TARF does not verify the underlying data, procedure(s) or methodology used by the various authors of the research articles found on the TARF website. Reliance on the information found on the website is solely upon the user of the information.
The following article has been included in the TARF website with permission from The American Real Estate Society. The article, Lumber Futures and Timberland Investment by Sherwood Clements, Alan J. Ziobrowski, and Mark Holder, was published in the Journal of Real Estate Research in Volume 33, No. 1, 2011. Author contact information is found at the end of the article.
Using 20 years of data, we derive a pricing model for timberland market values. We examine the relationship between lumber futures, capitalization rates, anticipated inflation, anticipated construction, and timberland value. Using an ordinary least squares regression model and Johansen’s (1988) cointegration technique, we find that timberland market values have a long- run significant positive equilibrium relationship with lumber futures and building permits. Capitalization rates have a significant negative relationship as expected. In the short run, unanticipated shocks in the independent variables provide a permanent change in timberland market values.