How Healthy is the Residential Housing Market?

How healthy is the residential real estate market…really? If history is a guide, things are peculiar. New home sales and median new sale prices have generally moved in line with one another, but since the time of the housing crash volume has lagged far behind price. Is it coincidental that interest rates have been kept near zero during the same time period, or the cause? 

housing market

Chart courtesy of zerohedge.com

US Commercial Real Estate Deal Volume = Back to Bubble?

As the article by Sarah Mulholland of Bloomberg points out,

“Real estate deals surged to $129 billion during the three months through March, marking the most active start to a year since 2007, according to Real Capital. “

As capital searches for yield and safety, US commercial real estate is in high demand by global investors. Prices continue to rise driving cap rates lower with the added help of a supply shortage of new product. As lenders continue to loosen underwriting standards, things most certainly will get interesting. With 1Q15 the hottest start to a year since before the last pullback, is it time to worry, a sign of a recovered market, or both? To be continued…

Link to full article.

Time to raise cash for the next market downturn?

From Steve Roth’s, Chairman and CEO of Vornado Realty Trust, 2014 Shareholder Letter,

“I am beginning to get a little wary. It looks like the easy money has been made for this cycle. Asset prices today are high, well past the 2007 peak, and acquisitions are getting dicey. Our sense is that this may be a better time to harvest than to invest…and that this is the time in the cycle when the smart guys start to build cash. At Vornado, we will continue to build cash reserves for opportunities that will undoubtedly present themselves in the future.”

How much room does the current real estate cycle have left to run? No one actually knows, but like Vornado, we have started raising capital in the last year to get prepared for the next downturn opportunity.

Link to full Letter and Annual Report