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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Sun Mar 11, 2007 5:21 pm Post subject: The next wave of the US Housing Market Crash - REITs |
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I told you about the housing sales and pricing declines before they happened …
I told you that the subprime mortgage industry would end in disaster before the stocks blew up …
And today, I want to tell you about the next major group of companies that I think are going to get hit from the housing bust. I'm talking about apartment Real Estate Invest Trusts (REITs).
The Rental Market Has an Achilles Heel: Too Much Inventory
I first mentioned these companies this past November in “ Apartment REITs Ready for a Fall? ” I told you then how investors were flocking to REITs, especially companies that own and manage apartment complexes.
As I explained, their basic investment thesis was:
Housing is unaffordable, and both sales and prices are falling.
Since people have to live somewhere, they'll end up renting.
That will push demand up, supply down, and rental rates through the roof.
I was skeptical. I said if you'd already made big money in the run up, it was a good time to bag your gains.
Today, I'm more convinced than ever that apartment REITs are primed to fall, maybe sharply. Why?
You see, the bulls argue that traditional apartment construction has been weak. And to a certain extent, they're right — companies haven't been building all that many 200-unit or 300-unit rental complexes.
But here's the problem with that argument: Too many homes, townhomes, and condominiums WERE built — and sold to buyers as investments. In other words, they were sold to people who were going to turn around and rent them out anyway!
And even more homes were bought as “flips” — houses that would be quickly fixed up and resold. Heck, some buyers never even thought they'd have to go through the fix-up stage … they figured they'd be able to sell for higher prices with no additional work whatsoever.
Unfortunately, the housing market plunge has turned many of these flippers into unintentional landlords. They can't sell, and they can't afford to pay mortgages, insurance, and taxes while their houses sit there empty, either. So they're trying to rent their properties to staunch the cash flow bleeding.
In other words, while the construction of traditional apartment complexes may have lagged during the boom, plenty of town homes, condos, and single-family homes were churned out along the way. The result: Hundreds of thousands of those units are now sitting empty!
The U.S. Census Bureau says 2.7% of the country's homes were vacant in the fourth quarter of 2006 — the highest percentage in U.S. history!
http://www.marketoracle.co.uk/Article489.html |
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louis202
Stranger
Joined: 27 Mar 2007
Posts: 2
Cash Points ££ 26.32
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| Posted: Tue Mar 27, 2007 4:24 am Post subject: |
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Well the market is getting balance, and is not in every State in USA still there are huge areas that are emerging, lets remember this is a huge country and the economy is still strong...In this emerging markets there are great opportunities to get great prices and great homes that is 3 to 5 years will earn upto 60% to 65% increase in value. Don't be foolled by the ever alarming press and news, Real Estate still is and will always be the best investment for a secure return.
We are taking about a market that is 20 times bigger than UK with still great deals |
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