Good morning last night while reviewing my emails, I received a publication from one of my closes contacts. The title of the email was “U.S. Real Estate Prices Have Bottomed.” For a bull like me that came as no surprise, hell all of you that read my posts know I called that over a month ago, but the guy that sent it to me was a Bear Last Week and told me; “I think you might be fighting the market and you are way early.” Getting this email from him made me really want to examine the article. To my surprise the article was written by Larry Edelson of Weiss Research Inc. Now, I have read Weiss many times and reviewed Larry’s articles too. These guys have wrote for years about the coming doom of Real Estate way before 2007 and I knew about it from them and other economist writers so getting an article from the Polar Bears titled, “ U.S. Real Estate Prices Have Bottomed.”; I knew that history just might be in the making! Article date July 29, 2009 Guess what ? The Polar Bears are going Bullish on Real Estate and URE was recommended by Larry! Larry gave five reasons for the turnaround in Real Estate! First, new home inventories are at previous recession lows. Second, existing home inventories have also fallen sharply. Third, anecdotal evidence points to a pickup in demand. Fourth, housing affordability has come back down to the CPI inflation line. Fifth, on an international basis, U.S. property prices are cheaper than they’ve been in the last 10 years. “I would consider the Proshares Ultra Real Estate ETF (URE), which tracks twice (200 percent) the daily performance of the Dow Jones U.S. Real Estate Index. Though leveraged and not a pure real estate play in the sense that it also includes commercial real estate investment trusts (REITS) in its holdings, I believe it’s one of the better ways to play a turnaround in property prices”, wrote Larry. Note: To avoid conflicts of interest, Weiss Research Inc. and its staff do not hold positions in companies recommended in UWD, nor do they accept any compensation for such recommendations. Well, I wanted to get this information out to all my buddies on the webpage.
Joe Danyko M.S.B.A. (Quality & Project Management) I personally do not recommend any investment and I am a holder of URE!
<First, new home inventories are at previous recession lows.> "New" homes are down because nobody is building. There is still a glut of homes on the market. What was 'new' last year, is this year's foreclosure. The recession continues, but it WILL bottom somewhere...
<Second, existing home inventories have also fallen sharply.> <Third, anecdotal evidence points to a pickup in demand.> 2 and 3 sound like the same thing. Is it anecdotal, or is it real? Will it continue when interest rates rise, state property taxes rise, and the government stops giving away $8000 to buy a home?
<Fourth, housing affordability has come back down to the CPI inflation line.> Maybe it's back in line with where it should have been, but we're in a cash-tight/scary/deflationary/risky time. Most assets fell to deep-discount prices. Not just 'in line'. Has all the risk been discounted in if it's just 'in line'?
<Fifth, on an international basis, U.S. property prices are cheaper than they’ve been in the last 10 years.> Yes, but the last 10 years was acknowledged to be a mis-priced easy money bubble. See my comment for "4".
These comments were directed to residential housing, most REIT stocks are in Commercial real estate. Many have BIG debts that will have to rolled over in the next couple years. Are they going to be able roll the debt over at lower interest rates?
Eventually we'll climb out of this hole, but it's pretty tough to say it's over. When they find some new business to fill up the empty Circuit City buildings and shopping malls.. then maybe we're getting somewhere.