*Updated on 11-28-06*
*Update 2, fund up: RWX*
Here’s a snap shot of my updated Global Markets Notes/Outlook regarding real estate. Yes, everyone’s saying how the “bubble” (if there really is one) is bursting, but commercial real estate is a completely different ballgame and is more attractive than ever. I’m eager to see the first international real estate ETF go live soon.
- Real Estate
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- Real estate did not and is unlikely to rise/fall with equity/FI market
- Localization
- Bloomberg REIT index up 20%+ YTD (11-20-06)
- ‘07 forecast: 50/50 (11-20-06)
- Residential (11-26-06)
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- Housing market will be affected by seasonality
- Residential RE constructions down 17.4% Q3, most since 1991
- Existing home sales down 12.7% Q3 YOY
- Foreclosures up 42% since Oct. 05
- Prices down 1.2% – NAR – underestimated
- Rising income/cheaper fuel offset declining home values
- Volume down but prices up in coastal areas
- Commercial (11-06)
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- Not highly correlated w/ residential RE: rental/leasing up when construction/new home sales down
- Rising rents & tighter vacancy rates in future due to:
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- White-collar jobs are growing
- Institutional investors’ demand growing for higher return than treasury & lower volatility than equity
- Blackstone LBO of Zell’s $20B trust (11-20-06)
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- Largest takeover of RE company
- More M&A to follow as Blackstone reserves $13B for real estate (11-26-06)
- Zell accepted 8.5% premium, eager to sell
- CMBS (11-9-06)
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- Started in early 90s & currently in high growth mode w/ deals up to $2B
- High growth & preferred financing structure in South Africa w/ $0.5B underwriting within last 12 months by Growthpoint (11-06)
- Not highly regulated industry
- Delinquencies declined Q1~Q3 ‘06, largest drop in hotels (61%) due to improved sector health
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