Warren Buffett, the outspoken and ever so confident billionaire
businessman is back at it making some bold predictions. This time
he is back to dealing with the Real Estate industry. It was not
long ago when we blogged about how just in March, Buffett even
predicted that there would be a strong housing boost
due to the high demand and low interest rates in the market. Now,
he has made an outsize bid on ResCap loans showing how stern he is
behind his contention that investing in Real Estate will prove to
be a very lucrative decision in the near future.
New home inventories are at their lowest point in 5 decades with
roughly only 144,000 of these properties on the market; this just
barely below their six month threshold. This was according to Joe
Light of the Wall Street Journal who was interviewed on this topic
on the WSJ Live show known as News Hub. He noted that home prices
are inching up now, and on a seasonally adjusted basis, have
improved by 0.9% across the country from a year ago. The primary
reason behind this is the vast momentum that home prices have been
benefitting from.
It was only a year and a half ago when home prices rose for a
year but only to then drop again. This evidently failed to provide
the public with any inkling that a lasting recovery was in the near
future. Despite this, the aforementioned momentum effect is
currently in the industrys favor and the price-to-rent ratio is
also back to the level they were at in 1998 or 2001, depending on
what index one looks at.
If an individual is a retail investor, they can play the real
estate rebound in two ways, Light highlighted. One of these ways is
on the housing side and there are several home builders, such as KB
Homes and Lennar, that some analysts think are poised to do well.
Moreover, people like Frank J. Haggerty, the Portfolio Manager at
Duff & Phelps Investment Management Co., are also investing in
commercial real estate investment trusts. These forms of investment
in commercial properties are taking advantage of that other side of
the market.
Haggerty indeed favors Real Estate investment trusts to have
shorter leasing times as well. Some examples of these investment
trusts are properties such as apartment buildings and self-storage
units that have short leases. In addition, the hope is that when
the economy improves those who own these properties can raise their
rents more quickly. Only the future will tell if these beliefs by
Buffett and other experts will come to fruition. However these
notions nonetheless must be respected as well-researched opinions
on the direction of the Real Estate market and hence should not be
ignored because if they are we unfortunately may miss this likely
profitable bus.
More Information: Wall Street
Journal