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Friday, June 24, 2011
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8 comments:
Anon
Let's ask a less controversial question.
For DC MSA wide real estate what should be these answers
1) Rental yield on SFH houses?
2) Cap Rate on MFDU apartments
3) yield spread on 5 year money for real property investing?
4) Rent vs Buy Premium for purchase of a SFH or Condo.
Pat-
I think you are expecting these investments to have the same yields as they have historically. The problem is that the 5 year treasury rate is 1.4% vs. ~5%+ historically. So with any market efficient hypothesis you would also expect to earn dramatically less over the next five years than normal no matter what you invest in (real estate, stocks, bonds...)
In all honesty Pat, I dont have much of an opinion as to your question.
I will give you a more detailed answer later, but first I want to resolve an oustanding issue I have with Kevin. In case you havent noticed, we are in a pretty epic pissin match goin on 2 posts back.
So in the interim, why dont you sit back, pop some popcorn and watch the show!!!
Anon, everybody is waiting in breathless silence for your time....
http://franklymls.com/DC7555991
assessed at 230K, sells for 50K.
79% down...
Granted it's trinidad, but still.
for a house to lose this badly, something in Georgetown needs to go up a lot.
wow at 50K, it's a real earner.
Granted, you really need to earn your money there, fixing it up and
getting a tenant, but,,,,
For pat
Values have been soaring as measured by the first-year yield, called a capitalization rate, or "cap rate," which moves in the opposite direction of prices.
"It's been amazing how much cap rate compression we've seen for prime assets in D.C. and Manhattan," Dan Fasulo, managing director at Real Capital Analytics, said. "It's clear to me that the last several trades have come in at sub 5 cap rates, which is aggressive."
Washington attracts global investors interested in buying and holding on to their properties, Kevill said.
"What they want to do is buy exposure to the stability and long-term growth of the Washington trophy market," Kevill said. "They're not concerned with income in the first few years. They're focused on long-term appreciation and long-term cash yield."
Robert
Bubble 2.0?
Commercial real estate is all measured in cap rate, what that signals is the long term expectation of CRE investors is for deflation or low inflation for the long term or the misplacing of risk.
CRE is funded on 5 year paper, you need to plan low cost money at this cap rate, low vacancy or strong rent growth...
Be aware how dangerous this is.
Pat-
The markets are pricing low cost money for a long time already. Look at interest rates its not just short term ones that are low.
Also you can follow the path of logic that says if vacancies are still high and there has been little rent growth the economy would still be weak and thus interest rates will stay low.
The only way that the Fed will raise rates is we either get significant core inflation or unemployment falls to a more normal rate 5-7%. In both of those cases the properties price would likely go up.
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