NoFate

Is Wells Fargo's Latest Memo a Sign Real Estate is Bottoming?

This memo means Wells expects housing to drop up to 25% more in non-overheated markets. That is hardly a bullish indicator.

Based on the CS Index housing prices are falling faster than any time in US history. Catch a falling broadsword?

And yeah, they are way late ...along with everyone else. They probably don't have much margin left to make loans anyway though ...and they sure can't sell the mortgages to anyone else.

Time to Reconsider REIT ETFs

If you look at IYR since 2000 it looks just like the Case-Shiller Housing Index. It was flat from 2000-2003 then shot up from $40 to $95 between 2003 and 2007. Now it is down to ~$66. Hardly a bargain ...and hardly worth comparing to T-bills which are risk free.

Housing prices still have a long decline ahead ...and CRE is starting to roll over as well. Add to this the credit crunch, reduced consumption and unemployment that awaits us and buying long here is a very risky proposition.

IYR addmittedly got a nice bounce out of the emergency Fed cut, but at least wait for a higher low before buying.

Disclosure: I continue to hold SRS, which are still in the money.

Keep an Eye on REITs' Correlation With Equities

I would be more concerned about the correlation with the Case-Shiller housing index. IYR also doubled in 4 years between 2003 and 2007 ...prior to that it was pretty flat.

And I realize IYR has a high % of commercial property, but I think investors bid it up mainly because it was a real estate play and more liquid than buying actual property. In fact, IYR got a big lift right after Paulson's mortgage plan was announced ...which won't directly affect commercial property at all!

Finally, I agree foreign REITs might be the way to go though ...as long as you avoid other bubble countries! The Economist had a great article on which countries have inflated housing prices a few issues back.

Real Estate: How Far, How Fast?

Your final chart seems to indicate that there is only a 30% chance that REITs will decline in price over the next year if I am reading it correctly. I think this is way too bullish.

I think we are in a very unusual place with RE and the markets right now. So much so that they can't be modeled very well using historical data. It's like trying to predict a Katrina event or a bad earthquake with historical data.

Given the dizzy heights we are at on the Case-Shiller Index ...and the fact that things are really beginning to unravel ...I think it is impossible to predict anything, except down. I would predict something along the lines of a 10% chance that REITs will be higher in a year and 10% that they will get cut in half ...80% that they will be somewhere in between.

Thanks for responding though ...I respect your opinion even if I disagree!

Real Estate: How Far, How Fast?

Who do you think you are kidding? Using ICF as an example, it nearly tripled in 4 years!!

I don't care what kind of software or math you are using, but this is a bubble. The REIT charts all look like NASDAQ in 2000!

The party is over -
1) Property values will revert to the mean (eventually).
2) There will be such a glut of RE out there rents will probably drop as well.
3) Pray we don't have a recession ...then we will have huge vacancy rates.

Anyway nice try, but I am not buying. In fact, what I AM buying is SRS (a double short against a REIT index).

Housing Market Bad But No Longer Worsening

Shiller rules ...you guys are fools!