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Returns on US forestry hit their highest since the global economic crisis, and are poised for further gains, despite setbacks to hopes for housebuilding, a key destination for lumber. A timberland index compiled by National Council of Real Estate Investment Fiduciaries showed returns of 9.36% in the year to the end of June, the highest figure since autumn 2008, as the world was falling into slump. The figure, of which income accounted for 2.71 points and capital appreciation for 6.51%, came against a backdrop of disappointment for the domestic property market, slowed by rising borrowing costs. “The second quarter rise in US interest rates and the 9% drop in overall US housing starts triggered a slight downward adjustment in forecasts for housing demand for the remainder of 2013,” the council said. Shares in DR Horton and PulteGroup tumbled on Thursday after both housebuilders reported slowdowns in sales growth, fuelling fears over the impact of raised interest rates on the sector. DR Horton said that its new house orders rose 12%, year on year, in the latest quarter, below Wall Street expectations of a 28% figure, and the 34% the group achieved in the previous period. PulteGroup orders fell 12% in the quarter, compared with Wall Street forecasts of 4% growth. ‘Growth ahead’ However, Ncreif said that “expectations are still on track for housing starts to climb north of 950,000 starts for 2013, a strong improvement after 2012’s 780,000 starts. “As the economy and housing markets continue to improve, the timber fund index should continue to see positive results.” The returns from timberland are well below those of 20.0% from farmland over the past year, but unlike agricultural property is on a rising annual trend, on Ncreif data. The disappointing domestic housebuilding conditions contrast with buoyant export demand, which drove log prices in the US Pacific North West up 10% in the April-to-June period. Chicago lumber futures tumbled by 24% over the quarter. Weyerhaeuser profits rise The data came as Weyerhaeuser, the US timber giant, reported a quadrupling to $196m in underlying earnings for the April-to-June quarter, on revenues up 19.4% at $2.14bn, growth it attributed largely to the “improving housing market”. Earnings per share reached $0.35, ahead of Wall Street forecasts of a $0.29-a-share result. Weyerhaeuser shares edged 0.3% higher to $52.85 in early deals in New York. Continue reading →