Want To Invest In Real Estate?

As an asset class, real estate should be a part of every balanced investment portfolio. That’s because real estate investments generally have a low correlation to stocks, can offer lower risk, and provide greater diversification.

Today about 65% of Americans own a home, but that means that tens of millions of Americans have no exposure to real estate. Making matters worse, becoming a homeowner today is harder than in previous generations, with 1 in 5 millennials believing they will never be able to afford a home. Is there a way to get exposure to the real estate market for as little as $100?

Residential Real Estate Market Trend

From the chart below, we can see that the residential real estate market continues to climb, and the median price of houses sold in the US is near recent all-time highs of $347,500. Even though mortgage rates remain near all-time lows, the appreciation of prices in certain pockets of the country are making many cities and areas simply unaffordable for most. Things look much the same for industrial, commercial, agricultural, and most other specialized real estate subsectors.

Real Estate

How Can You Invest In Real Estate Through The Stock Market

The stock markets offer three different ways you can invest in real estate, and today we will be looking at three of them: REITs, ETNs, and ETFs. Continue reading "Want To Invest In Real Estate?"

Is There A Housing Bubble 2.0?

If you're looking at the stock market to sniff out a potential asset bubble, you may be looking in the wrong place. It may be right in front of your face.

When the millennial generation came of age, we heard all about their preference for renting – not out of any love for renting necessarily but because many of them were priced out of the housing market – and their supposed desire to live in urban areas with all the cultural offerings they provide.

Along comes the Covid-19 pandemic, and suddenly nobody wants to live in cities anymore. Instead, everyone it seems is moving to the suburbs, enabled by low-interest rates and the necessity of working from home. That has driven up the price of homes just about everywhere. Indeed, the National Association of Realtors announced last week that in the third quarter, every single one of the 181 metro areas it tracks showed a year-over-year price increase, something that's never happened before. Moreover, 65% of them – or 117 – rose by double-digit percentages, led by a 27.3% jump in Bridgeport, CT, the county seat of Fairfield County, which includes Greenwich, CosCob, Darien, and other New York City bedroom communities.

Needless to say, the runup in home prices nationally increases the income needed to afford a home. The median price of an existing single-family home nationally jumped 12% on a year-over-year basis, to $313,500, the NAR reports. At the same time, the monthly mortgage payment on a typical single-family home rose Continue reading "Is There A Housing Bubble 2.0?"

A New Lease On Life

“Buy land, they’re not making it anymore,” Mark Twain once said. That investment advice doesn’t look too smart lately, but then again, Twain wasn’t known for his financial acumen.

Commercial real estate used to be a great investment. You didn’t hit any home runs, but you got a dependable income stream and fair price appreciation that almost never lost money. Real estate and REITs didn’t correlate with stocks or bonds, so you also got a good diversification.

How does that look today?

Last week the Federal Reserve warned in its May 2020 Financial Stability Report that “asset prices remain vulnerable to significant price declines should the pandemic take an unexpected course, the economic fallout prove more adverse, or financial system strains reemerge.” It highlighted commercial real estate as one asset that was particularly vulnerable.

“Prices of commercial properties and farmland were highly elevated relative to their income streams on the eve of the pandemic, suggesting that their prices could fall notably,” the Fed said.
That warning shouldn’t come as a major surprise for those who have been paying attention for the past three months. Most shopping malls are closed. Other than supermarkets, Walmart, Target, and dollar stores, most retailers are closed. JC Penney, Neiman Marcus, and J Crew have already filed for bankruptcy, and likely more will follow them. Restaurants are closed except for takeout. Many of these establishments may never reopen. Millions of people are working from home, but likely a high percentage of them will never go back to the office. Continue reading "A New Lease On Life"

Is Real Estate The Next Shoe To Drop - Part 3

Our continued research into the state and status of the Real Estate market continues to point to a process that is starting to unfold in the US which may put price and activity levels at risk. Within the past two segments of this research article, we’ve highlighted how market cycles and recent market data point to a Real Estate market that may be in the early stages of a downward price cycle.

Additionally, within Part II of this article, we highlighted the human psychological process of dealing with a crisis event which also suggests a deepening price contraction event may take place within the next 12 to 24+ months.

US New Home Sales Data Was Just Released

We believe the psychological process is just starting to become evident in the current data. For example, the US New Home Sales data was just released and it shows the sharpest decline in activity since June 2010 (nearly 14 months after the actual bottom in the US stock market in March 2009).

Real Estate

Our researcher team believes investors/traders and many consumers have become complacent with the current data and are simply in denial in attempting to relate future economic outcomes to the current set of circumstances. There has never been anything like this to disrupt global economic activity and consumer engagement over the past 100+ years. Not even the Great Depression or WWII was on this scale. Continue reading "Is Real Estate The Next Shoe To Drop - Part 3"

Is Real Estate The Next Shoe To Drop - Part 2

As we continue to delve into the looming Real Estate crisis that will likely hit the US and globe over the next 12 to 24+ months, we want to focus on the human psychological process of dealing with a crisis event and how that relates to economic engagement. In the first part of this research article, we discussed how the time-line and events that have unfolded over the past 120+ days have setup a continuing global crisis event. The best of our knowledge, there has been nothing like this, other than massive wars like WWII, that have taken place on the planet over the past 75+ years.

This presents a very real possibility that human psychological processes have engaged throughout the planet that may disrupt how effective the recovery efforts are in the near future. If humans engage in a traditional psychological crisis-cycle process, then there is little chance that the economic recovery will reach 2018-2019 levels very quickly. Let’s review the psychological process of a crisis event.

The Normal Psychological Reactions To A Crisis Event Are

Vicarious Rehearsal: People that are distanced from the crisis event (location or expectations) tend to react in a way that reflects their belief that “it won’t result in any dramatic changes to their lives”. Thus, they continue behaving and acting as they would without the crisis.

Denial: The process of denial takes on many forms. Some people simply ignore the warnings or information related to the crisis. Others become agitated or confused. Some simply chose to believe the threat is not real and others may believe the threat does not relate to themselves.

Stigmatization: Sometimes, segments of society may become stigmatized by their community as anger or blame drives people to believe infected people or segments of society that may promote the crisis event are identified. We’ve already seen some of this type of activity throughout the globe take place. Continue reading "Is Real Estate The Next Shoe To Drop - Part 2"