Gary likes small luxuries, health care and apartments among investment sectors.
On Apartments: “last year our index of apartment REITs gained 14%. This year we look for further gains in rental apartment prices and securities related to them. Rental apartments will continue to benefit from the separation that Americans are beginning to make between their abodes and their investments. The two used to be combined in owner-occupied houses back when owners believed house prices never fall, and they hadn’t since the 1930s. So they bought the biggest homes they could finance. The collapse in house prices has shown them otherwise. A further 20% weakness in the prices of single-family houses due to the depressing effects of excess inventories will add fat to the fire.
It will take a surprisingly small shift in housing patterns to make a big difference in the demand for and construction of rental apartments. Today, there are 114 million housing units in the U.S., of which 38 million are rented. If only one percent of total households decided to move to rented units, the demand for rentals would increase by over one million, most of which would need to be newly built apartments, after current vacancies are absorbed. This is a big number compared to new apartment starts of 333,000 on average over the past 10 years. To put it another way, each 1% decline in the homeownership rate increases rentals by more than one million, to the extent those ex-homeowners don’t double up.
Rental apartments will also appeal to the growing number of postwar babies as they retire, downsize and want less responsibility and more leisure time.
See all of Gary’s picks in this edition of John Mauldin’s Outside The Box
Amid limited supply and demand edging up, market conditions for the multifamily sector should be favorable in 2012 but Europe is a wildcard for the economy. Demographics support demand says Ron Witten, president of Witten Advisors; “The data suggests that somewhere over 60 percent of the jobs created in 2010 and 2011 have been 20- to 34-year-olds going to work. That’s very good news for the apartment sector.” See more at: http://bit.ly/Aq73Sf
… and other apartment market predictions for 2012 from industry leaders. See video here: Fannie, Freddie to remain dominant Multifamily lenders next 2-5 years
(CNNMoney) — Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.
The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae and Freddie Mac to investors in bulk. The properties would then be converted into rentals.
If you have taken out a mortgage on (or refinanced) your home (or business property) in the last 10 years or so chances are the title of your property is clouded so badly that no one can legally foreclose on your loan. This is the result of an illegal, little known operation that was specifically setup to expedite the rapid securitization and trading of mortgage securities. Further it was explicitly devised to circumvent the centuries old democratic process of recording property ownership and mortgages against those properties at county clerks offices across the country.
See the quotes below, read Barry Ritholtz’ take on it here: http://bit.ly/yGMaGc or read the whole article here: http://harpers.org/archive/2012/01/0083752 Not a subscriber? $15.00/year through Amazon: http://amzn.to/zQDafi Continue reading “… every MERS mortgage is defective” a NY State Supreme Court judge.
More of the same is the general outlook but opportunities exist in Class B and specific markets. See the video here: http://bit.ly/Avv9aj
Unemployment still 9% and tenants in C props having harder time keeping up with expenses and rising rents. Meanwhile developers will need three years of building to bring market back into balance. See more at: http://bit.ly/wxm5jf
New development is picking up but is restrained by lack of lender appetite.
Senior housing to see vacancy decline below 10% also.
Via Grubb & Ellis’ 2012 Real Estate Forecast available here: http://bit.ly/xfBnmd
Thanks to Jason Brumm of G&E San Antonio
AFT: When you look at some of the cap rates on recent transactions, do you feel like the multifamily industry is getting a little overheated in some markets?
Brickman: I do not. I think it is perfectly rational where cap rates are now. The cap rates are driven by financing costs, and what you’re really saying is, can cap rates go up? Of course they can, and if [interest] rates go up significantly, cap rates would likely go up, but it’s not one for one. What you have to look at is [that] the spread of cap rates to Treasuries is actually quite wide.
AFT: It’s probably more than 400 bps now, on average.
Brickman: Exactly, and historically it has not been anywhere near that wide—it’s been more like 250, 300. And so you’ve got a very healthy risk premium to real estate right now, and you’ve got strong growth forecasts. There are very positive influences lining up behind demand and a relatively anemic level of supply. So, I think you can legitimately sign up for pretty healthy rent growth. And that [in] itself justifies a low cap rate even independent of the interest rate.
See the whole interview at: http://bit.ly/xp9VM7
We have a herd of cattle. A flock of chickens. A school of fish, be they large or small. A gaggle of geese. A pride of majestic lions. Believe it or not, a murder of crows. An exaltation of doves. Wisely, a parliament of owls.
Then we are left with baboons. Baboons are, by most estimates of those that care about baboons, the loudest, most dangerous, most obnoxious, most viciously aggressive, and least intelligent of all primates. A collection of such horrible things is called, and you can’t make this stuff up, a Congress!!
Vince is an old hand who’s seen a few market cycles and his hard earned wisdom is well worth listening to in these times. Send him an email and ask to get on his list: firstname.lastname@example.org Or catch him on CNBC, Bloomberg, MSNBC, etc.