MetLife Agricultural Finance Forecasts U.S. Housing Starts to be 16 Percent Below Consensus, Reaching Only 1.5 Million by 2020
July 20 2016 - 12:00PM
Business Wire
Millennial home purchasing behavior and
changes in availability of credit impacting forecast
U.S. timberland asset class provides
attractive medium- to long-term investment despite
slower-than-expected recovery
The huge Millennial generation has not yet reached home-buying
age and credit remains tight, causing MetLife to predict that
housing starts will reach 1.5 million by 2020, 16 percent below
consensus. The resulting weakened demand for lumber will continue
to weigh on pricing and demand over the near term. However,
emerging supply shortages will bolster U.S. timberland investments,
according to Millennials, Housing, and the Timber Recovery, a new
study by MetLife Agricultural Finance.
“We believe that the primary headwind to a fast recovery in
housing starts is that the homeownership rate will remain below the
historical average of 65 percent through 2020,” said Hugues
Rinfret, director of research, MetLife Agricultural Finance. “This
is due to continued credit availability constraints and its impact
on 35-44 year-olds, as well as the fact that 90 percent of the
Millennial generation have not yet reached age 31, the median age
of first time home buyers.”
The U.S. lumber market is closely tied to U.S. housing starts.
Homeownership rates are at 36-year lows and, at the end of 2015,
lumber prices were nearly 20 percent below their 2004 peak. For the
next five years, lumber demand and pricing is expected to remain
below the historical average. However, according to the study there
is a positive outlook for lumber demand over the medium and long
term. This is in light of the expectation that Millennials will
eventually purchase single-family homes in greater numbers, coupled
with the emergence of non-housing demand drivers.
The study also finds that:
- Timberland values have been
surprisingly resilient, despite low timber prices. More than a
decade of low interest rates and the more than 30-year timberland
investment time horizon explain the resilience in timberland
values. Over thirty funds currently manage more than $57 billion of
timberland assets for investors who cite the long term investment
horizon, low correlation with the general economy, biological
growth regardless of economic conditions, and a relatively stable
stream of cash flows as appealing characteristics of the asset
class.
- Despite short-term headwinds, the
long-term outlook for U.S. timberlands as an asset class is
positive. A slowdown in the annual acreage growth of planted
forests, supply issues in British Columbia, Canada, and new global
demand drivers suggest the potential for a growing timber supply
deficit. MetLife Agricultural Finance believes that the U.S.
timberland asset class is particularly well positioned to meet the
world’s increased demand for wood and wood fiber, making
investments in this sector attractive for investors with long-term
horizons.
A copy of the study is available upon request.
About MetLife Agricultural
Finance
MetLife Agricultural Finance oversees an agricultural portfolio
consisting primarily of mortgages for farms, ranches, food
production, agribusiness and timberland. MetLife has provided
agricultural financing solutions since 1917, and is one of the
largest agricultural mortgage lenders in North America. MetLife has
agricultural investments offices in Fresno, Calif., Overland Park,
Kan., Memphis, Tenn., and a consulting office in Sao Paulo,
Brazil.
About MetLife
MetLife, Inc. (NYSE: MET), through its subsidiaries and
affiliates (“MetLife”), is one of the largest life insurance
companies in the world. Founded in 1868, MetLife is a global
provider of life insurance, annuities, employee benefits and asset
management. Serving approximately 100 million customers, MetLife
has operations in nearly 50 countries and holds leading market
positions in the United States, Japan, Latin America, Asia, Europe
and the Middle East. For more information, visit
www.metlife.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20160720005050/en/
MetLife, Inc.John Calagna, 212-578-6252jcalagna@metlife.com
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