By Nathan Slaughter, Scarcity & Real Wealth

In Warren Buffett's latest annual letter to shareholders, he gives a ringing endorsement to what is arguably the most spurned of all investments: housing. In fact, he boldly claims that it would be smart for affluent investors to "load up" on single-family homes.

 I couldn't agree more.

Now, most of us lack the idle cash to buy up entire neighborhoods or invest in new developments like Buffett does. But there is another way to can take advantage of the housing turnaround: lumber. In particular, we like Weyerhaeuser (WY), one of the world's largest integrated forest products companies.

It owns vast tracts of shady land in Arkansas, Louisiana, North Carolina and several other states, some six million acres in all.

The company is fortunate in that it owns two million prime acres (33% of the firm's total) in Oregon and Washington -- the industry sweet spot.

As a result, each of Weyerhaeuser's acres generates $80 in annual EBITDA on average. That's far superior to two of its biggest rivals, Rayonier and Plum Creek Timber.

And timberland only accounts for one-quarter of the company's revenue. The largest segment, with $2.3 billion in annual sales (38%), is wood products, which includes boards, plywood and other finished goods used to build homes and businesses.

This unit is currently operating at a loss, which isn't terribly surprising given the operating environment.

But to give you an idea of what it can do under better conditions, the company was shipping nearly $10 billion worth of wood products per year before the crash -- four times what it sells today.

But even under dismal conditions, Weyerhaeuser still managed to generate $330 million ($0.62 per share) in net profits last year across all the company's business divisions. And it wasn't even jogging, let alone running at full speed. That's why I'm looking ahead to tomorrow.

Management calculates that the wood products unit needs 665,000 housing starts per year to turn a profit. Builders are currently breaking ground at an annualized pace of 750,000 -- and even that's just half of the 1.5 million new homes built on average each year since 1971.

Keep in mind, as a real estate investment trust, the company aims to distribute at least 75% of its pre-debt cash flow. Shareholders can currently look forward to $0.60 per share in annual dividends, for a yield of 3%.

I expect those payments to climb significantly in the coming years as housing wakes from its slumber and construction picks up.

In the meantime, demand from overseas remains brisk -- the company exported $370 million in logs last year to Japan, China and South Korea.

You can't build houses without more wood. And that's exactly why I think timber owners are primed for a strong rally in the coming year.

Of course, with investing nothing is 100% certain. The housing market is still fragile and nowhere near full strength. So initially at least, I think we'll see an uneven recovery where hits are occasionally punctuated by misses.

But, that said, the fact remains that the U.S. isn't building nearly enough new homes to keep pace with the number of new households being created. Eventually, the two will come back into balance. And when they do, timber owners could be a clear beneficiary.

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• Weyerhaeuser: Timberland profits