Widely Followed Apartment Market Cycle Research Misses Widely

The Strange Tale of the Seattle Apartment Building Investment Cycle and Maybe Yours Too.

Back in 2012 it appeared that Seattle’s movement through the real estate cycle was stalling out. Not the actual market by any stretch of the imagination but instead where it was placed on the apartment market cycle charts in the Cycle Monitor report from Dividend Capital Research. These quarterly reports on the real estate market cycles for the five main Commercial Real Estate (CRE) sectors in more than fifty markets around the US were widely followed but something was wrong.

Seattle apartment occupancy vs. Cycle Monitor Market Position 2005 - 2014
Click on images for full size.

Why this up to date proprietary data is vitally important to your investment success:

You can fix a property but not a market cycle. Knowing where a market is in its cycle is critical for investors seeking to buy low and sell high. If signals are a year or more behind, prime opportunities will be missed to Continue reading Widely Followed Apartment Market Cycle Research Misses Widely

QE is the connection between international tensions and your investments- Dr. Malmgren

Video: Dr. Philippa Malmgren explaining the connection between your investments and all the geopolitical wrangling taking place right now.

The exec sum:

  • Leading industrialized nations carry (and continue to pile on) unsustainable levels of debt
  • Most options for reducing the debt are non-starters:
    • Reduce current spending- Not good for re-election in a democracy
    • Reduce future spending by cutting retirement and healthcare benefits- Also politically untenable
    • Repudiate debt- Advanced economies run on debt and can’t afford to be cut off from debt markets
    • Restructure debt- Again advanced economies can’t afford to cut off from debt markets
  • But there is one tried and true method

Continue reading QE is the connection between international tensions and your investments- Dr. Malmgren

A Family Inflation Gauge for Everyday Americans; rent, food, energy, medical costs, education and childcare.

Yes the Fed is fighting DEflation but it sure doesn’t feel like deflation when we go to the store or pull up to the gas pump. While I am glad that Ben is battling the correct demon, it would be very helpful to know what ‘living inflation’ is doing to or for our apartment residents. Especially since on their National Apartment web conference earlier this week Reis said that in many of their largest 79 markets class B & C owners ability to raise rents has or soon will run into the 35% of income barrier. Watching what the costs of rent, food and beverages, energy and medical expenses are doing to our residents’ pocketbooks could guide us in raising rents.  Today Pragmatic Capitalism had a very interesting piece on just that.

Inflation Gauge for Apartment Building Investors and residents
Source: Pragmatic Capitalism http://pragcap.com/wp-content/uploads/2012/10/CPI1-e1349809833759.png

Right now ‘Family Inflation’ is in the 2% range but you can see that last year it was as high as 7% and that it’s quite volatile. Most of that feels like it could be from rising fuel costs but let’s take a look to see if we can find out what’s really going on. Continue reading A Family Inflation Gauge for Everyday Americans; rent, food, energy, medical costs, education and childcare.

Apartment rents rising at inflation rate- Freddie Mac video report

In their June 2012 Economic Update, Freddie Mac says: “Over the year ending March 2012, an additional 1.5 million households moved into rental housing. That’s a 4 percent increase in renter-occupied dwellings in a single year.”

The increase in apartment demand has helped to enhance property values, on average up about 25 percent during the past two years from their trough during the first quarter of 2010…

See the whole report here: Rental Markets: A Sign of Strength

 

 

 

Economists Prove Einstein’s Theory About Repeating Behavior And Expecting Different Results.

Mainstream economic theory (MsET) has two fundamental tenets that most thoughtful people (even economists) realize are wrong and yet economic decisions and importantly even Fed policy is still based on this flawed model. We know what Einstein said this defines and it’s true.

Problem #1 is the Efficient Market Theory (EMT) or Theory of Rational Expectations says that economic information is widely distributed and that we as individuals and collectively as a market of decision makers and consumers consistently make our choices based on what will give us the most benefit. This has been scientifically proven to be not the case way more often than we like to think. For more on this see “Predictably Irrational” by Dan Ariely and “Thinking, Fast and Slow” by Kahneman in the ‘On Our eReaders Now’ box in the far right column of this page.

The second problem is that MsET is built on the idea that the economy tends to be stable and that dislocations are temporary and tend to correct themselves back to stability somewhat like a train running down the tracks that gets thrown off from time to time. History teaches us that is not the case either. Most often we are moving away from or back towards stability and occasionally pass through stability but typically overshoot. It doesn’t take much imagination to see how these two errors cause problems for economists (and us) and leads to a dismal reputation for them.

I’ve been reading a lot on economics lately searching for a new improved model and have just found a number of articles that tackle those issues. They are lengthy but well worth the reads. The first two were posted by John Mauldin in his ‘Outside The Box’ (OTB) series where others write about and discuss their sometimes opposing views from John’s. Mauldin will begin each piece with an intro about the author and where he might differ from that point of view. His guests are typically people who deal at the highest levels and their insights are Continue reading Economists Prove Einstein’s Theory About Repeating Behavior And Expecting Different Results.