The younger generations are not in a big hurry to own a home, which means timber investors should expect low returns through 2020, found a new study by MetLife Agricultural Finance, a subsidiary of MetLife Inc.
MetLife has $2.5 billion in timberland, less than 20% of the insurance company's total $13 billion global agriculture portfolio.
MetLife expects housing starts to reach 1.5 million by 2020, below the earlier consensus forecast of 1.78 million housing starts, the report noted.
“It's fair to say ... we expect returns to be below consensus until 2020 and then after that they will accelerate,” said Hugues Rinfret, director of research for agricultural finance, in the Morristown, N.J., office of MetLife.
New homes and home remodeling are the main drivers of demand for lumber, accounting for about 70% of demand, Mr. Rinfret said.
Not only are millennials delaying buying a home, but individuals who are 35 to 44 years old likewise are not rushing into homeownership. Also, credit for new mortgages remains tight.
MetLife executives predict homeownership rates will remain below the historical average of 65% through 2020 and then return back to the average, Mr. Rinfret said.