As you’ve undoubtedly heard, the U.S. housing market has softened a bit in recent months due to a variety of factors. Rising mortgage rates are the most recent culprit, adding to a list which has included low inventories of homes available for sale, a preference to rent vs. own, high prices/crazy bidding wars, etc… The …
Category: Real Estate
Predictions and Pixie Dust
You know what really bugs me? Predictions. The prediction market is a saturated commodity market for the most part, in my opinion. Granted, there are a lot of smart people whose job it is to make predictions but there’s too many in my opinion and I often find myself suffering from prediction fatigue. If you …
Housing Prices – A Lot Cheaper Than They Look?!
Interesting write-up on Bloomberg this morning about housing prices via a Harvard study. Chart below captures the main message which is two-fold from my perspective: We’re very far from 2006 levels, implying we’re no where close to a housing bubble. As a matter of fact, we’re below late 1980 levels. I suppose certain U.S. markets …
Debt Worriers
Let me start by saying that I’m an advocate for lower versus higher debt in my personal life and generally when it comes to the companies I invest in. There has been a lot of consternation in recent years about debt levels as government deficits have increased, public pensions appear to have major shortfalls, corporations …
Luck and Persistence
I’ve been lagging on my blog posts. I have a lot of catch up to do. A lot of interesting things are happening in the world of investing and a lot of really interesting and insightful write ups from a variety of authors. Today, I wanted to point you to two posts from the Of …
The Natural Rate of Interest
With all the recent hullabaloo about the 10-year UST yield breaking 3%, I found this recent letter from SF Fed President, John Williams, very fair and balanced. Future Fortunes of R-star For readers that aren’t familiar with the concept of the natural rate of interest, it’s simply the real interest rate (nominal or published rate …
It’s Different This Time
Similar to the equity market, we’re seeing quite a bit of asset price inflation in the housing market. Somewhat surprisingly, the 6-month rolling average of new home sales prices as a multiple of average family incomes exceeded last cycle’s peak, as of 12/31/17, and has actually done so for quite some time now. While a chart …
REIT Margins vs. Multiples
Margins and multiples for a given sector tend to be quite cyclical. It’s no different for REITs. While margins may permanently expand as a portfolio gains scale, it will still be subject to the cyclical fluctuations in revenues and operating expenses. We compared EBITDA margins to EV/EBITDA multiples[1] from last cycle’s peak to current levels …
REITs
2017 has been a choppy year for REITs to say the least. Barring a true Santa Claus rally, it is going to end up being a lackluster year for REIT returns. Overall, breadth remains decently healthy (more stocks are advancing than declining) and in an uptrend. However, the price trend is much more uncertain as …
The Case for Real Estate
Investments in income generating real estate are much more prevalent at the institutional investor level than they are at the individual, or retail, investor level. Part of this is likely due to capital constraints and illiquidity but could also be a result of real estate not fitting neatly into modern portfolio theory’s asset optimization approach …