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mlreits

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Reply with quote  #151 
I will go out on a limb here and say we will not hit HAI of 17 this time around.  It's currently 30 for SFH and 39 for Condo/Townhomes.  San Francisco County hit 10; San Mateo hit 13, and Santa Clara County hit 19 in the 2nd quarter of 2015, which is very close to historic highs.  The market will likely top out in summer 2016 and plateau in summer 2017 before the decline.  I hope I'm wrong and the markets stays strong for another 5 years.  We'll have to wait and see.
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larrywww

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Reply with quote  #152 

So this is an article by Economist William Yu of the UCLA Anderson Business School, which makes the following generalizations about house prices in LA County:

1) The average bull cycle in California normally lasts 7 years, the bull phase 5 years.
2) We are currently in the 3rd year of the bull phase and are up 27%.

Previous bull phases arrived at much higher price increases:
1975 to 1980: up 69% over 23 quarters
1984 to 1989  up 67% OVER 22 quarters
1997 to 2006 up 166% for 38 quarters

I think we need to eliminate the 1997 price increase as atypical (Bruce does as well, in part because lending was out of control, etc).  Based upon the other 2 markets, then the average increase would be 68% over 22.5 quarters (over 5.6 years).

I think the 22 quarters figure is a pretty conservative approach since no recent bull market has ended sooner than this.  (Although I am sensible to the argument that our current market doesn't exactly match past markets in some respects.)

So based upon this standard, if one is looking at LA only (which is different from Bruce's model based upon HAI statewide), then the prediction would be another 41% price increase over another 11.5 quarters (or roughly 3 years).  And since according to Professor Yu, the recovery started in Q3 of 2012, this would put the market top as being Q4 of 2017---roughly 2 and 1/3 years from now.

(Likewise: This should mean that the bear market will start in Q1 of 2018---and since the shortest bear market lasted only 15 quarters---we should be back into the buying business in 2018.  My advice is to go on vacation now so  you will be ready for the 2018 bear market.  On the other hand, some experts see the bear market as much closer, see below.)

I' m a little puzzled how he arrives at this conclusion, which is namely:
"we are three years into the housing recovery that started in 2012 with 27% appreciation so far.  On average, there will be four more years or 38% more price growth before we reach a turning point."

The part that puzzles me is the 7 years---if one focuses on the above bull markets statistics none lasted more than 6 years (or 24 quarters)---there is nothing like 7 years (or 28 quarters). Am I reading this wrong?  (I think what he must have done was average the lengths of the 3 bull markets---but I would tend to leave the 2006 runup out because I just think it's so atypical in so many ways.  So maybe my approach is a bit more conservative---or maybe I am relying on the fact that 2 out of the 3 markets in question only lasted a bit more than 22 quarters.  No matter.)

No matter.  However, you slice it, it seems like, according to this analysis, there is still some chicken left on the bone.   And if the past is any guide, we still need to await for a majority of the appreciation to arrive. 

There are other statistics Professor Yu cites, and I know this isn't necessarily going to work for the Bay area and other California markets.   And everyone needs to come to their own conclusions, which reflects their own attitude towards risk.

http://www.latimes.com/opinion/op-ed/la-oe-0818-yu-la-housing-bubble-20150819-story.html

On the other hand, there was an article in the San Francisco Chronicle a few weeks ago that implied that some California markets (San Francisco, San Rafeal, San Diego, Oakland-Berkely) may be in near bubble territory.

This was based upon the analysis of the following real estate experts:

"Norm Miller, Hahn Chair of Real Estate Finance in the School of Business Administration's Burnham-Moores Center for Real Estate at the University of San Diego (USD), Michael Sklarz, president of Collateral Analytics and Jim Follain, senior vice president for research and development at Collateral Analytics."

So, in part this may depend on where you live---and/or which experts you are prepared to believe in.  (I doubt that Bruce would agree--but, again, you need to pick the experts you are going to choose to follow).

http://www.sfgate.com/business/fool/article/Don-t-Believe-the-Housing-Bubble-Rumors-Unless-6407245.php

Forbes has a list of the most overpriced housing markets in the US.  And although the Bay Area made the top 10, they were not in the top 5 overpriced markets.

I'm not sure what methodology they used to arrive tat this list.

http://www3.forbes.com/business/americas-most-overpriced-cities-in-2015/26/

 
Another  interesting article from the Washington Post also suggests that one of the continuing legacies of the previous market has been bidding wars (in part assisted by the low inventory), even though many investors have withdrawn from the market.  The article, although primarily concerned with the Washington DC market, suggests there has been a permanent change in the real estate markets in many cities, LA among them, so that this will now become "the new normal".  Although the article doesn't make any specific predictions about when the market will crash.

The article suggests that:

"a curious thing has happened since the housing market has returned to something more rational: The bidding wars haven't gone away.

A practice that was rare in the 1980s and 1990s now seems here to stay in markets like Washington, D.C., a permanent gift of the housing bubble (if you want to look at it that way). Lu Han and William Strange, economists at the University of Toronto's Rotman School of Management, have concluded as much after looking at data from the National Association of Realtors dating back to the 1980s.

They find, in research published in the journal Real Estate Economics, that only around 3 to 4 percent of homes on the market across the country were selling in bidding wars for years prior to the bubble. Then at the bubble's peak, nearly 30 percent of homes in metropolitan D.C. were selling this way, the highest share of any metro Han and Strange studied. The same was true of about 22 percent of home sales in Baltimore and Norfolk, 23 percent in Las Vegas and 26 percent in Los Angeles.

Since the housing collapse, these crazy numbers have declined, but not back to their earlier levels. As prices have fallen and the number of home sales has, too, bidding wars haven't disappeared apace. That means that we're probably seeing not just a lingering effect of the housing bubble, or even a pure product of high housing demand, but a new strategy for selling homes that was embraced during the bubble."

One of the observations of the article that has certainly proven true in California---is that agents have become  particularly adept at generating bidding wars by artificially listing a house at a low purchase price, and then stepping back while the buyers bid the listing up.  (In fact, groups of agents in some areas---the Bay area is certainly one---have sometimes organized flipping operations such that their listings are sold at an artificially low price, only to permit them to flip the property at market value during the next sale.)


http://www.washingtonpost.com/news/wonkblog/wp/2015/03/10/a-legacy-of-the-housing-bubble-that-wont-go-away-home-bidding-wars/

On the other hand, just to round up one of the "usual suspects", Christopher Thornburgh, he recently has indicated that he doesn't think we are currently in a housing bubble.  Although he doesn't give a specific prediction about when we will finally get into trouble:

"There has been a lot of ‘bubble’ talk lately. Sure, there is the lunatic fringe—such as Ron Paul’s online interview about the coming crash of the U.S. currency, or Jim Rickard’s dire warnings of the impending 25-year depression conveniently laid out in a $25 hardcover book ($13.99 for the Kindle edition!). But now, a number of more conventional voices are getting into the mix. Type ‘bubble’ into Google’s news search and all sorts of stories pop up about stocks, technology, and property bubbles on the verge of popping.

I've been receiving a lot of inquiries about the current situation—bubble or not?!—perhaps because of my correct call regarding the fortunes of the U.S. housing and financial markets back in 2006 and 2007. That said, a lot of callers seem surprised as to how sure I am that we are not in a situation I would refer to as a bubble this time around nor is the current U.S. expansion threatened by the trends we’ve seen in asset prices in recent years.

My reasoning is founded on exactly the same logic it was in 2006 and 2007. It isn’t enough to just look at price appreciation. Rather you have to look at economic fundamentals and ask whether they line up with trends in the financial markets. If they do, there is little reason to worry—and right now they most certainly do.

I am not worried about the U.S. financial markets because:

  1. Asset values are being built on actual performance, not speculation.
  2. The U.S. economy is not being driven by an excess amount of financial liquidity.
  3. Trends in the real and financial economy do not suggest that any sector is growing excessively.

In 2006 the exact opposite was true on all three counts."

Although the article is not only about real estate, it does contain the following statement about the real estate market:

"A similar argument can be made for home prices. Yes, they have been rising rapidly since 2012. Home prices nationally are within a whisker of their pre-collapse peak, set back in 2007. And some sub-markets are far beyond those record prices. But this doesn’t tell us much. We have to consider what the cost of buying a house is for the average homebuyer. Incomes have been rising over the last few years—admittedly slowly—and even more importantly, mortgage rates have fallen back below 4%. When we look at housing affordability while controlling for these trends a vastly different picture emerges. Home prices have been rising (and affordability falling) but only from the record low levels hit during the worst years of the bust. From a long-term perspective homes are still very affordable—more so than at any time since the early 1990s. This is not a bubble market."

His overall conclusion is that:

"Today’s steady-as-she-goes markets could well overshoot the mark in a couple of years. And I have little confidence that the rules put into place by Dodd Frank did much to cool the worst incentives among Wall Street barons. So it could get ugly. But not now."

https://beaconecon.com/blog/US_financial_markets_what_me_worry_6_11_2015


Christopher Thornburgh will be giving his annual prediction about Riverside county in October (at which Bruce Norris will also appear), so maybe we will see an updated prediction at that time.

It will also be interesting to see what Bruce Norris and his experts say during the I Survived Real Estate presentation in October.

Finally, there is some very interesting commentary in the San Diego papers, referenced by Fred Eckert, about the real estate market and why we aren't really experiencing a normal recovery. 

https://www.facebook.com/fredeckert/posts/10152934957642142

The key takeaway is that most of the United States, including most of California, is experiencing a much slower than normal recovery (except for certain areas----Bay area, silicon valley, Seattle).   And the price appreciation is much slower than normal (5% neighborhood) and appears to even be slowing down from this rate.

"Mark Goldman, loan officer at C2 Financial Corp. and lecturer at San Diego State University, offered a reminder that Case-Shiller numbers are reported on a 60-day delay.

“The market has been stabilizing; values are still increasing but at a very moderate and a sustainable rate,” Goldman said.

While Goldman thought appreciation would slow to 3.5 percent last year and instead it remained around 5 percent, he said again that appreciation would likely drop closer to 3.5 percent for 2015.

“I expect housing price appreciation to decline a little more and the reason for that is affordability,” Goldman said. “Also household incomes will hold affordability down.”

Buyers today are limited to what they can afford. Instead of pinpointing how much they’d like to afford, buyers are now asking lenders how much they’d be willing to lend. More stringent lending requirements — and no more “stupid money” — are also holding the market back, Goldman said.

Buyers also have lower expectations going into the market with regards to their property values rising. Instead of looking at a home as a quick investment, there is more focus on a home as a utility and a purchase as a means to stabilize housing costs.

In San Diego, aside from select ZIP codes such as the Carmel Valley area, Nevin said there isn’t the price movement and competition that there should be.

“It has to do with the fact that people are not listing their homes,” Nevin said. “The active inventory just isn't there.”

The Greater San Diego Association of Realtors said that inventory as of July was stagnant at 2.6 months worth, while five to six months is considered healthy. Homes are closing in an average of 35 days.

“In this community, our resale home market really works when people are trading up or trading in, and that's what causes the large resale market to occur,” Nevin said.

“In the industry, the typical story has always been, every time you sell a new home, there are four resales that get sold. But what's happening here is we're not building any new homes, so we're not getting the roll-through to new homes.”

People aren’t feeling comfortable with their jobs, Nevin said, so he anticipates the rest of the year’s activity remaining at the same pace."

All in all, it's a rather muddled picture.





kaihacker

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Reply with quote  #153 
Thanks for the detailed post Larry. There is an impressive amount of relevant info there. I will reread it in a few days when I get some more time.  
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larrywww

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Reply with quote  #154 
Bruce Norris in a short interview on Flipnerd.  His main commentary on why prices aren't rising faster is to criticize those economists who believe that declining affordability and/or higher prices explain this.  He believes that instead restrictive lending practices that have sidelined many worthy buyers, which he still believes will eventually be liberalized, but haven't yet.

Bruce also believes that Fannie and/or Freddie won't likely solve the problem.  And given that FHA has been sidelined because the lending limits are still way too low to fuel a price rally.  Bruce is hoping that conventional lenders will start to liberalize their lending criteria.

It will be interesting to hear what Bruce and the other economists say on the I Survived Real Estate presentation about why the market is still relatively flat (later this month).

larrywww

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Reply with quote  #155 
Bruce most recently interviewed Sean O'Toole of Foreclosure Radar. 

Some highlights of the interview:

1) Sean originally predicted the market would be flat to maybe a 10% decline. (This was less a prediction and more like a hope on Sean's part since he believes that affordability has decreased so much that it would be healthier for the market to take a breather).  In fact, sales were up 5 to 10% and the median price rose from 385K to 415K.  (Sean's median price is different from that of CAR since the Car figure is the result of sampling whereas Sean includes all sales in California).
2) What has been really odd about 2015 is that it's been a bit of a roller coaster ride.  January/ February started with sales down to such an extent that you would have to return to early 2008 to find something comparable.
3)  Curiously, sales then took off dramatically in March through May and ultimately 2015 ended up improving over 2014.
4)

The bottom line is that it's been a bit of a mixed bag---and the market has been rather unpredictable during 2015.  

I guess we will have to wait for I Survived to get their 2016 predictions.

mks_97

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Reply with quote  #156 

Something  I found interesting was that Sean was surprised how much money was flowing into the US from abroad (US being the safer haven) and how much investors were chasing yield. This  was driving down mortgages and increasing investor activity in real estate (rental and vacation), causing prices to go up. He felt this could continue into the next decade. He was referring to the Japanese style deflationary environment.

Rents generally go down in a deflationary environment. There is no indication of that happening anytime soon. Lots of homes are being converted into vacation rentals in coastal areas further reducing long term rental inventory.


mlreits

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Reply with quote  #157 
Quote:
Originally Posted by mks_97

Something  I found interesting was that Sean was surprised how much money was flowing into the US from abroad (US being the safer haven) and how much investors were chasing yield. This  was driving down mortgages and increasing investor activity in real estate (rental and vacation), causing prices to go up. He felt this could continue into the next decade. He was referring to the Japanese style deflationary environment.

Rents generally go down in a deflationary environment. There is no indication of that happening anytime soon. Lots of homes are being converted into vacation rentals in coastal areas further reducing long term rental inventory.




Agree with your assessment about investors chasing yield and drive up property value.  I hope Sean is right about "this could continue into the next decade?" so wife can also retire early.  [biggrin]

Good observation about homes/condos being converted into short-term vacation rentals.  Some folks in the Bay Area have turned this into a full-time business and have done quite well.  Not only that, some also converted their homes/condos into corporate rentals which took even more inventory out of the housing market.  Rent has gone ballistic this year.  The hotel industry has been lobbying the city councils to clamp down the AirBnB short-term rentals.  One of my friends made the headline on the Oakland newspaper for running his many units as short-term rentals on AirBnB. 

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mlreits

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Reply with quote  #158 
Quote:
Originally Posted by larrywww


1) Sean originally predicted the market would be flat to maybe a 10% decline. (This was less a prediction and more like a hope on Sean's part since he believes that affordability has decreased so much that it would be healthier for the market to take a breather).  In fact, sales were up 5 to 10% and the median price rose from 385K to 415K.  (Sean's median price is different from that of CAR since the Car figure is the result of sampling whereas Sean includes all sales in California).

I guess we will have to wait for I Survived to get their 2016 predictions.



I agree.  Sean's prediction usually has emotion/hope in it. Bruce, OTOH, just follows the data.  Whoever is attending the 2016 I Survived Real Estate, please give us a summary of the event. 

TIA.

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Reply with quote  #159 
I commented on Bruce Norris talk at the San Diego RE Club last week, but aside from that, Norris had an advertisement for a seminar Feb. next year entitled "Cashing In On a Boom".  In the brochure advertising this talk, he refers to what he calls "Quadrant 4"  I don't know if he thinks Quadrant 4 is coming soon or when.  He didn't mention it at all in his talk to the San Diego real estate club last week.  But the interesting thing is that the brochure says "This cycle can be the most explosive for wealth growith and the shortest in length".

It certainly would be nice to know when Norris predicts Quadrant 4 will start and what time frame he thinks it may end.
I believe Quadrant 4 is Norris' version of the final blowoff phase in a real estate cycle.  Maybe other members in this group
know more about what Norris means for Quadrant 4.

Also, from what Bruce said last week at the club meeting, I think a lot of his forecasts are being more limited now to Southern Calif. and not statewide because he mentioned San Jose/San Francisco surpassing previous market peaks already, being in a class all to themselves, or words to that effect.

Bryce


GeorgeB

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Reply with quote  #160 
http://realestateconsulting.com/wp-content/uploads/2016/02/U-Haul-BMI-Map_updatedtitle.png?utm_source=hs_email&utm_medium=email&utm_content=25977715&_hsenc=p2ANqtz-88Co7n2lDVOm-7zhANkjwfeQ-ichwF600RcD_l_KCiGe3oEdEtkZW3X51Uq7oBYVp5Qtma4kqnybmttQ_yj27rb0q2kA&_hsmi=25977715
larrywww

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Reply with quote  #161 
In episode 372 of his radio program, Bruce interviews the Chief Development officers of Roofstock.

What I thought was interesting was Bruce mentioned (this was after the 18th minute of the interview, approximately) as an aside that:

"When an investor goes to sell homes, and I've just gone through this, I mean I literally put out notices, OK, time to go, so, my cash flow ended the month I suggested that, and Uh, the logical person to purchase it was going to be an owner occupant, and that was true 100% of the time in the inventory that I've just gone through . . . "

So Bruce has sold out, right?

He mentioned that from the time he started the process, it took 3 to 6 months to sell his homes.

So has a Sell signal officially gone out?

And maybe the sell signal first went out at least 3 to 6 months ago? 

Or even longer than that?

daveklee

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Reply with quote  #162 
Does anybody know what Bruce Norris' current thoughts are on where we're at in the real estate cycle?
larrywww

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Reply with quote  #163 
Interesting database that shows appreciation since 2004 (on the Washington Post website). 

They chose 2004 to gauge recovery from the Great Recession (a year or so before the markets may have topped out and crashed, depending on where in the country you are looking at).

You can plug in a zip code to see the result.

https://www.washingtonpost.com/graphics/business/wonk/housing/overview/?zip=#90210.

The Inland coastal areas that are urban areas in California seem to have done quite well by this metric.

The Bay area and Silicon Valley, BTW, have done even better than Southern California--no surprise there.

It's a slightly different kind of question than what Bruce typically asks---namely---what areas will appreciate over a time frame longer (slightly) than just one market cycle.

They have a case study----the Stockton-Lodi area has lost 20% of its value during this time frame---while the Bay Area and Silicon valley have in many cases have doubled--or almost doubled. 

https://www.washingtonpost.com/graphics/business/wonk/housing/stockton/?hpid=hp_hp-top-table-main_housing-divide%3Ahomepage%2Fstory

The Washington Post Wonkblog has demographic studies like this from time to time.

There are going to be followup reports on the following housing markets next week in the WP:  Atlanta, Charlotte and Washington DC.
daveklee

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Reply with quote  #164 
Has anybody heard Bruce Norris' latest talk, "Stay Put, Cash Out, Or Change Seats?"  If so, can you share what's his view of the current market?
larrywww

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Reply with quote  #165 
Bruce basically isn't predicting a specific time frame, just basically lays out the criteria for reaching a market peak and states that we aren't there yet.  In fact, probably most of the criteria aren't favoring a peak right now.

The point of the talk is that the "changing places" could mean 1031ing into either (1) more easily manageable inventory and/or (2) Inventory that has a better chance of appreciation.

He mentioned quite a long time ago that he sold some of his inventory and bought in an area with newer houses that sold at a better price per square foot.  And of course he is building houses in Florida.  But it's not like he has announced a market peak or anything.

I don't know if you are an investor who pays the annual fee at his website, that may have more robust information, etc.

I do believe that Bruce has indicated informally (it wasn't part of his standard talk) that in January of 2017 he will be releasing a new report---he hasn't released a title yet, however---and I' m not sure what the subject matter will be.  

If you wanted some idea about his presentation, there is a market report that appears on youtube to which we posted a link.

larrywww

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Reply with quote  #166 
One factor that hasn't necessarily been emphasized in Bruce's real estate model is how the world economy is doing.  But it is surprising how poorly the global economy is doing---the US is frequently cited as one of the holdouts.

Sam Zell, for one, thinks that global slowing is going to force the US into a recession.  The article mentions that Zell correctly predicted the peak of the last commercial real estate cycle.  It is mentioned that he sold his office portfolio to Blackstone Group at the top of the market---just before the market crashed in 2007.   And he sold other assets in 2006--again, before the crash.

http://www.wsj.com/articles/sam-zell-global-woes-will-likely-push-u-s-into-recession-1461080326.

There is another article mentioning that Zell is selling some of his real estate assets at a 20% discount.

http://www.barrons.com/articles/sam-zells-real-estate-assets-selling-at-20%-off-1461753690

In another article in December of last year, he predicted a US recession within 12 months (which would put us 6 months away from the downturn).  

http://www.bloomberg.com/news/articles/2015-12-16/billionaire-sam-zell-says-recession-likely-in-next-12-months.

The assets he is selling include retail, office and multifamily---including dumping multifamily development projects.

http://wolfstreet.com/2016/05/27/market-timer-sam-zell-fed-interest-rate-commercial-real-estate/

Here is an article that outlines Zell's investing career, who was the founder of some of the largest REITs.   http://www.investopedia.com/articles/investing/102915/how-sam-zell-made-his-fortune.asp.

Zell started to liquidate his multifamily portfolio late last year.


http://www.wsj.com/articles/sam-zell-edges-out-of-apartments-1445832247

Zell's current point of view is summarized as 22 ideas below (from an interview in late December of 2015):

Twenty-Two Ideas

  1. Economy: High probability that we're looking at a recession in the next 12 months.
  2. Rate Hike: Interest rate hike is probably 6 or 8 months too late. I think that the economy is closer to falling over than it is to going up.
  3. US Dollar: Devalued currencies make it very difficult for the US to compete internationally.
  4. World Trade:  World trade is slowing. Currencies continue to be manipulated. You're looking at the beginnings of layoffs in multinational companies. Weakness is going to be pervasive.
  5. Global Deflation: You can't put aside China. You can't put aside Europe. If China's numbers turn out not to be as accurate as we think, China could go into a recession. That's about as deflationary a scenario as you could possibly come up with. And one that would for sure impact growth and affect Janet Yellen's decision.
  6. Fed Tools: “Uh” …  [as in the Fed has none]
  7. Asset Prices: Assets will get cheaper.
  8. Cash: With zero interest rates the penalty for holding cash is not very significant.
  9. Stock Market: Nothing cheap. A number of falling knives that have been obfuscated by Amazon and Facebook et cetera. If you take out those stocks, the stock market isn't doing real well.
  10. Mexico:  Mexico is terrific. I think there's extraordinary opportunity there.
  11. China: I don't think China is growing as fast as it reports to be. And I think that the world has a significant deflationary risk coming from a slowdown in China which I think would impact the cost of goods all over the world.
  12. Brazil: Brazil is obviously suffering significantly. On the other hand, as an investor I'm always looking at where nobody else is willing to go. We're there already and under the right set of circumstances wouldn't have any problem investing in Brazil today. I just think you can't lose sight of the fact that this is a country with 180 million people. It's still growing. It's self-sufficient in water, oil, food. It's an extraordinarily badly managed you know entity. But the extraordinary part hasn't changed. I'm somewhat of an optimist and I think this whole process will be a cleansing process.
  13. Oil: It's not so much prices as it is specific opportunities. What makes the opportunity is the distress of the situation.
  14. Natural Gas: I'm probably more focused on gas than oil. And it's, you know, it's a little bit like real estate. I mean we made a fortune because we bought real estate at a discount to replacement cost. Well we're buying gas in the ground, gas that's been drilled. People have spent $10 million a well, we're buying wells at dramatically less than that. So it's the same kind of creating a competitive advantage by virtue of your entry price.
  15. Real Estate: It's very hard not to be a seller. And so we're in effect fulfilling in some respects our longer term strategy in AQR where we're liquidating the remaining garden apartments we have.  I'm not a big fan of buying at these cap rates.
  16. Blackstone: Blackstone is just buying brick and mortar. And they've been able to raise staggering amounts of money. And they've got to put that money to work. That's something we've never wanted to be in a position of having so much capital that it affects our decision-making on an ongoing basis.
  17. Currencies: I'm very concerned about what's happening in currencies. I think that you know Bretton Woods in 1948 was the allies coming together and saying we can't recover in the world without growing free trade. We can't create growing free trade without stable currencies. So let's make sure we have stable currencies. That worked for a long time. Now we have very unstable currencies. World trade is slowing.
  18. Dodd-Frank: I've never known of a single situation in my life where reduction in liquidity was a plus. And effectively Dodd-Frank has dramatically reduced liquidity and that's a big negative. And that's something we haven't dealt with yet.
  19. Politics: The American people are extraordinarily angry. The American people are extraordinarily depressed. The last time we had anything like this in my opinion was 1979. [To a statement regarding Trump’s popularity Zell responded]:  It's because you guys are sitting here in New York City and you're not in Des Moines. And you're not in Boulder and you're not all over the country. And you're not seeing the enormous disparity that has existed between you know the coasts and the rest of the country. We have a lot of very unhappy people and I think this election is reflecting it. And I think it will be very dangerous.
  20. Flat Tax: I think if I were given a straight choice I would be in favor of a simple flat tax.
  21. Government Bonds: I'm not a big lender of money to governments period.
  22. Climate Change: The level of certainty of exactly what is happening has a lack of humility and arrogance to it that scares me. As far as I'm concerned, conventional wisdom is my greatest enemy. And this strikes me as an awful lot of conventional wisdom.

Read more at http://globaleconomicanalysis.blogspot.com/2015/12/sam-zell-warns-recession-coming.html#jvcsMDYz3Y2fvD80.99.

Admittedly, the commercial and residential real estate cycles are different.  But it's hard to look at all the global bad news and feel our residential markets are going to be totally immune.

I also have tended to discount permabear type predictions as being too uniformly pessimistic.  But Sam Zell isn't that kind of pundit--he has been a very successful market timer in commercial real estate---which is undoubtedly a greater achievement than trying to time residential.

Also, the zero interest rate environment has been very supportive of asset values---and must come to an end at some point.  Although Janet Yellen has backed off her promise to raise rates in the next few months, she has also made it clear that she desires to raise rates in the near future.

On the other hand, some commentators have raised caveats about Zell's predictions about the economy in general---while conceding his talent for predictions about commercial real estate.  This is from the calculated risk blog, which I tend to respect.  This is from a column in late 2012---though I'm unsure if his opinion about Zell's predictions about the economy has changed since then).

http://www.calculatedriskblog.com/2012/10/sam-zells-poor-forecasting-record.html

I'm not quite sure how to square the statements made in 2008 that are quoted by McBride with the earlier entries that said that Zell exited the market in 2006 and 2007---there are inconsistent statements that commercial RE will be fine in 2008.  So I am not 100% sure that he was entirely consistent in seeing a commercial RE crash in 2007, if those statements are to be taken seriously, and then stating categorically in 2008 that commercial RE is just fine, Thanks.

It sounds like part of his message at the time was that the owners of commercial RE and lenders just weren't in a mindset to surrender---even though he considered that they were being unrealistic.  

http://www.calculatedriskblog.com/2009/11/zell-on-cre-too-soon-for-grave-dancing.html

Although it is widely quoted that Zell is a successful market timer in Commercial RE, so I'm not sure how to resolve those contrary statements, but maybe what he was saying was that the value wasn't there, just that the markets hadn't caught up to reality at that point. 

But suffice it to say that our economy seems sufficiently precarious right now that I would take these warnings seriously and maybe the real estate rally will be snuffed out by economic conditions in general deteriorating.


larrywww

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Reply with quote  #167 
On a related topic, Bruce is giving the keynote address to the builder's association in Irvine.

What a difference a decade makes----he has told the story quite often about how he showed up in 2005 and was attacked for his pessimistic point of view.  It costs $129 to attend if you aren't a builder member.   The title of his keynote---very appropriate to this thread is--"What Inning are We Really In?"   The meeting is 4 hours long.

Is anyone planning on attending?

Here is the agenda for the meeting:


"What Inning Are We Really In?"

Friday, June 10th, 2016  |  Irvine Marriott Hotel

7:30 am Check-in & Breakfast
8:10am - 12:00pm Conference 

KEYNOTE SPEAKER:

Bruce Norris
President and CEO of The Norris Group

 

PANEL 1: Is Foreign Money Really Driving The Real Estate Market in OC?
Moderator:
Steve La Terra, Managing Director at Meyers Research
Panel:
Tom Doyle,
 Partner at WD Land
Tom Orradre
, Managing Partner at Isles Ranch
Bill Shopoff
, President and CEO of Shopoff Realty Investments

 

PANEL 2: Defining the New Normal in OC... Is it Infill?
Moderator:
Michael McCann, Development at Alliance Residential
Panel:
David Belmer
, Planning Development at City of Anaheim
Tony Ditteaux, President of Construction at Trammell Crow Residential
Howard Press, President at Watt Communities

rickencin

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Reply with quote  #168 
Quote:
Originally Posted by larrywww

Twenty-Two Ideas

  1. Economy: High probability that we're looking at a recession in the next 12 months.

Wow.  You've really thought about this!  So are you suggesting selling, going to cash, with near zero return, and waiting for the next buying opportunity?  I've been selling some of my properties.  What would you do with the cash?  Some kind of real estate loan backed by a first trust deed?  Cash?  Stock Market? Other?

Thanks for the information.

 

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So, caveat, I'm not a member of the punditry class, I just manage my own holdings.

And I'm not convinced that macro changes in the economy or the stock market can predicted with any great certainty---just too many moving parts.

One of the rules that Paul (now in North Carolina) has adopted in our discussions, and whose opinions I respect and I think make alot of sense, is that you pay attention to those who have been successful in the market timing of real estate---which is alot easier to do than either the economy in general or the stock market.  So I have studied Bruce Norris.   

And I have heard that Sam Zell has been successful in timing commercial real estate---though I am not 100% sure about all of his predictions.   And I'm not vouching for all 22 of his predictions--even if they are correctly reported---since Bill McBride of Calculated Risk disagrees with some of his predictions about the economy in general.  But even if you can't predict the economy in general or  the stock market, if Zell is right that commercial RE may soon suffer a downturn---this may be enough to upset the whole apple cart, which is rather precarious right now.  

And I agree with Zell to this extent---the no interest rate environment has been very supportive of asset prices---and once this regime ends, then assets will have to be viewed based upon a more realistic financing model.  And this could prove problematical for commercial real estate, and maybe even residential real estate ultimately.

I also think that if the world economy is flagging, it may be that the trigger for a real estate downturn may come from the economy in general---and nothing really inherent to the real estate world. 

And if commercial RE goes down a rabbit hole, and I'm not sure his prediction alone would be sufficient for me to accept this as a fact.  However, it concerns me since, if it were to occur, maybe it's a domino that has other consequences. 

Speaking for myself, I am taking the pessimistic forecasts a bit more seriously these days because:

1) There is a world economic slowdown, even to some extent from the developing countries that have powered economic growth so powerfully in the past.  The question is: Although the US hasn't fallen off a cliff yet, how long can the US fight against the tide in this regard and power the world economy so it doesn’t fall into recession?  I continue to find astonishing that the US is soldiering on while the major world economies, even China, etc. are stumbling.  

2) The fed has no tools to deal with an economic downturn since how can you go any lower if interest rates are already at zero?

3) I think the US should be spending more to stimulate the economy by doing infrastructure repairs, and in any case, if the economy is to some extent prone to faltering, this would help it out. But there seems no current prospect of this happening.   I don't know whether the US economy is going to prosper if it is living on a diet of starvation wages, and once consumers also decide to cut back, I think we might have some real issues in the near future.

4) You ask me where is the safe harbor---although that is very much an individual question.  For most of those who invested in real estate in 2009, they can buy rentals and other income properties that will probably take care of your foreseeable needs, especially if you aren’t highly leveraged.   I think Bruce Norris is “changing seats” by investing in properties that are either (1) easier to manage, in better neighborhoods or (2) investing in building houses in Florida and /or (3) buying properties that have a greater chance of appreciation.   And he has invested in trust deeds.   Although all of these are real estate investments, broadly considered.  But Bruce has choices that alot of us aren't going to find quite so easily---not to mention the luxury of time to research them all. 

5) Likewise, Sean O’Toole has invested in real estate ---and one of the things he likes about real estate is that the ups and downs are far easier to predict than the stock market or other kinds of investments.    

6)  Or take Mike Cantu---he’s never going to sell exit from real estate---he may be relocating to Orange County so he can surf every day, but he's not going to sell his portfolio of rentals since that is how he pays for his experiences.   No matter what kind of hit Mike Cantu's houses may experience, the tenants are still going to pay him rent.  And Mike (like most of us) is getting older---does he really need to work that hard to squeeze out the last dime? 

7) So, I don’t have any easy answers for you.   I would only tell you to go to cash if you didn't have a reliable portfolio of rentals and I knew for sure when the stock market and/or economy is going to tank.  But when am I---or any one else----ever going to know that for sure? 

8) In terms of my own situation, I like all forms of real estate investment---and my belief is that you should invest in what you know and have expertise with.   Trust deeds are a pretty safe bet, though the really great deals in terms of trust deeds probably mainly occurred several years ago.   But if you invest at the right LTV, I consider those safe bets, especially if you only invest at a safe LTV not based upon current value, but what the asset would fetch in a down market.    But with money so cheap and interest rates so low, not to mention more lenders competing for this business, the available trust deeds are n’t nearly as safe as what was available a few years ago.  But even to the extent that is true, if you bought in 2009, even with less good deals---how much cash do you really need to live?  Again, these are all individual questions---and I’m not suggesting any dramatic or risky bets.

9) Like Bruce, if you are going to 1031 into reliable and easier manage type income properties, this whole process is rather time consuming and finding your target property is going to be so time consuming, that I don't really worry about whether or not I get out at the technical peak.  I just want to have a reliable portfolio so when things get dicey, I can retreat into management that and just wait for the next buying opportunity.  Maybe I take the time to educate myself about other opportunities while I wait for the next buying opportunity. 

10) Some investors are exiting real estate permanently.  I do know that Rick Solis despises managing rental properties and will exit permanently---but he probably made enough money during this last market that it won't be a problem for him.  I have no idea where he is going, though I know that he has been investing in trust deeds for the last several years. He also has been making loans to rehabbers (not sure if he still doing that), or investing in stocks that have either a good dividend or prospect(s) appreciation.  I'm not sure if he is doing all of these things currently, and would be interested in hearing what his current investment strategy is.

As always, I'm open to suggestions if you have any.

rickencin

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Reply with quote  #170 
Quote:
Originally Posted by larrywww

And I'm not convinced that macro changes in the economy or the stock market can predicted with any great certainty---just too many moving parts.

you pay attention to those who have been successful in the market timing of real estate



It is difficult to predict the future as I've learned over the decades.  My pet theories that sound so good just don't pan out.  Paying attention to what successful people are doing sounds reasonable.

One of the nice things about real estate is that you can develop skill over the years.  You can get better at selecting tenants, writing contracts and hiring tradesman.  If I buy an S&P 500 ETF I can't really apply any skill. 


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Reply with quote  #171 
Quote:
Originally Posted by larrywww
One factor that hasn't necessarily been emphasized in Bruce's real estate model is how the world economy is doing.  But it is surprising how poorly the global economy is doing---the US is frequently cited as one of the holdouts.

Sam Zell, for one, thinks that global slowing is going to force the US into a recession.  The article mentions that Zell correctly predicted the peak of the last commercial real estate cycle.  It is mentioned that he sold his office portfolio to Blackstone Group at the top of the market---just before the market crashed in 2007.   And he sold other assets in 2006--again, before the crash.

http://www.wsj.com/articles/sam-zell-global-woes-will-likely-push-u-s-into-recession-1461080326.

There is another article mentioning that Zell is selling some of his real estate assets at a 20% discount.

http://www.barrons.com/articles/sam-zells-real-estate-assets-selling-at-20%-off-1461753690

In another article in December of last year, he predicted a US recession within 12 months (which would put us 6 months away from the downturn).  

http://www.bloomberg.com/news/articles/2015-12-16/billionaire-sam-zell-says-recession-likely-in-next-12-months.

The assets he is selling include retail, office and multifamily---including dumping multifamily development projects.

http://wolfstreet.com/2016/05/27/market-timer-sam-zell-fed-interest-rate-commercial-real-estate/

Here is an article that outlines Zell's investing career, who was the founder of some of the largest REITs.   http://www.investopedia.com/articles/investing/102915/how-sam-zell-made-his-fortune.asp.

Zell started to liquidate his multifamily portfolio late last year.


http://www.wsj.com/articles/sam-zell-edges-out-of-apartments-1445832247

Zell's current point of view is summarized as 22 ideas below (from an interview in late December of 2015):

Twenty-Two Ideas

  1. Economy: High probability that we're looking at a recession in the next 12 months.
  2. Rate Hike: Interest rate hike is probably 6 or 8 months too late. I think that the economy is closer to falling over than it is to going up.
  3. US Dollar: Devalued currencies make it very difficult for the US to compete internationally.
  4. World Trade:  World trade is slowing. Currencies continue to be manipulated. You're looking at the beginnings of layoffs in multinational companies. Weakness is going to be pervasive.
  5. Global Deflation: You can't put aside China. You can't put aside Europe. If China's numbers turn out not to be as accurate as we think, China could go into a recession. That's about as deflationary a scenario as you could possibly come up with. And one that would for sure impact growth and affect Janet Yellen's decision.
  6. Fed Tools: “Uh” …  [as in the Fed has none]
  7. Asset Prices: Assets will get cheaper.
  8. Cash: With zero interest rates the penalty for holding cash is not very significant.
  9. Stock Market: Nothing cheap. A number of falling knives that have been obfuscated by Amazon and Facebook et cetera. If you take out those stocks, the stock market isn't doing real well.
  10. Mexico:  Mexico is terrific. I think there's extraordinary opportunity there.
  11. China: I don't think China is growing as fast as it reports to be. And I think that the world has a significant deflationary risk coming from a slowdown in China which I think would impact the cost of goods all over the world.
  12. Brazil: Brazil is obviously suffering significantly. On the other hand, as an investor I'm always looking at where nobody else is willing to go. We're there already and under the right set of circumstances wouldn't have any problem investing in Brazil today. I just think you can't lose sight of the fact that this is a country with 180 million people. It's still growing. It's self-sufficient in water, oil, food. It's an extraordinarily badly managed you know entity. But the extraordinary part hasn't changed. I'm somewhat of an optimist and I think this whole process will be a cleansing process.
  13. Oil: It's not so much prices as it is specific opportunities. What makes the opportunity is the distress of the situation.
  14. Natural Gas: I'm probably more focused on gas than oil. And it's, you know, it's a little bit like real estate. I mean we made a fortune because we bought real estate at a discount to replacement cost. Well we're buying gas in the ground, gas that's been drilled. People have spent $10 million a well, we're buying wells at dramatically less than that. So it's the same kind of creating a competitive advantage by virtue of your entry price.
  15. Real Estate: It's very hard not to be a seller. And so we're in effect fulfilling in some respects our longer term strategy in AQR where we're liquidating the remaining garden apartments we have.  I'm not a big fan of buying at these cap rates.
  16. Blackstone: Blackstone is just buying brick and mortar. And they've been able to raise staggering amounts of money. And they've got to put that money to work. That's something we've never wanted to be in a position of having so much capital that it affects our decision-making on an ongoing basis.
  17. Currencies: I'm very concerned about what's happening in currencies. I think that you know Bretton Woods in 1948 was the allies coming together and saying we can't recover in the world without growing free trade. We can't create growing free trade without stable currencies. So let's make sure we have stable currencies. That worked for a long time. Now we have very unstable currencies. World trade is slowing.
  18. Dodd-Frank: I've never known of a single situation in my life where reduction in liquidity was a plus. And effectively Dodd-Frank has dramatically reduced liquidity and that's a big negative. And that's something we haven't dealt with yet.
  19. Politics: The American people are extraordinarily angry. The American people are extraordinarily depressed. The last time we had anything like this in my opinion was 1979. [To a statement regarding Trump’s popularity Zell responded]:  It's because you guys are sitting here in New York City and you're not in Des Moines. And you're not in Boulder and you're not all over the country. And you're not seeing the enormous disparity that has existed between you know the coasts and the rest of the country. We have a lot of very unhappy people and I think this election is reflecting it. And I think it will be very dangerous.
  20. Flat Tax: I think if I were given a straight choice I would be in favor of a simple flat tax.
  21. Government Bonds: I'm not a big lender of money to governments period.
  22. Climate Change: The level of certainty of exactly what is happening has a lack of humility and arrogance to it that scares me. As far as I'm concerned, conventional wisdom is my greatest enemy. And this strikes me as an awful lot of conventional wisdom.

Read more at http://globaleconomicanalysis.blogspot.com/2015/12/sam-zell-warns-recession-coming.html#jvcsMDYz3Y2fvD80.99.

Admittedly, the commercial and residential real estate cycles are different.  But it's hard to look at all the global bad news and feel our residential markets are going to be totally immune.

I also have tended to discount permabear type predictions as being too uniformly pessimistic.  But Sam Zell isn't that kind of pundit--he has been a very successful market timer in commercial real estate---which is undoubtedly a greater achievement than trying to time residential.

Also, the zero interest rate environment has been very supportive of asset values---and must come to an end at some point.  Although Janet Yellen has backed off her promise to raise rates in the next few months, she has also made it clear that she desires to raise rates in the near future.

On the other hand, some commentators have raised caveats about Zell's predictions about the economy in general---while conceding his talent for predictions about commercial real estate.  This is from the calculated risk blog, which I tend to respect.  This is from a column in late 2012---though I'm unsure if his opinion about Zell's predictions about the economy has changed since then).

http://www.calculatedriskblog.com/2012/10/sam-zells-poor-forecasting-record.html

I'm not quite sure how to square the statements made in 2008 that are quoted by McBride with the earlier entries that said that Zell exited the market in 2006 and 2007---there are inconsistent statements that commercial RE will be fine in 2008.  So I am not 100% sure that he was entirely consistent in seeing a commercial RE crash in 2007, if those statements are to be taken seriously, and then stating categorically in 2008 that commercial RE is just fine, Thanks.

It sounds like part of his message at the time was that the owners of commercial RE and lenders just weren't in a mindset to surrender---even though he considered that they were being unrealistic.  

http://www.calculatedriskblog.com/2009/11/zell-on-cre-too-soon-for-grave-dancing.html

Although it is widely quoted that Zell is a successful market timer in Commercial RE, so I'm not sure how to resolve those contrary statements, but maybe what he was saying was that the value wasn't there, just that the markets hadn't caught up to reality at that point. 

But suffice it to say that our economy seems sufficiently precarious right now that I would take these warnings seriously and maybe the real estate rally will be snuffed out by economic conditions in general deteriorating.





Thanks Larry that is good information on Zell.  One thing we DO know about Zell is he IS a real DO-ER, he did become a billionaire investing in RE, and he is not just another ivory tower pundit that writes a newsletter or is on CNBC and has no verifiable success record.

Rates may not go up.  You have to think, what is going to drive them up?

I agree that hard money trust deed yields have gone down and risk has gone up.  Funny how that works isn't it?  In 2009 lenders in CA could get 12% and 4 points all day, yet risk was less because properties had just fell way below replacement cost.  Yet there was less cash to lend because people were scared.  Now there are hard money flip loans in CA getting done at 8-9% AND the LTV is higher AND the market has more risk IMO since this is the 5th straight year of a sellers market with prices moving up.

If people think deflation is coming, cash is a great hedge.

Inventory remains so low and demand is strong in certain metros (especially Portland, Seattle, Denver, Austin) urban infill new construction is a big play right now (for example demo a SFR in a hipster area and build 4 modern zero lot SFR's).  

I've read where millennials hit the peak time for first time home buyers in 2022.  They will eventually stop renting and want to buy.  Maybe this could play out well in lower cost starter SFR areas.

I think the big thing that is different this time and what worries me is such low rates for so long.  We have never seen zero rates for close to 8 yrs in the U.S.  No one really knows how the distortions this may be creating are going to play out with possible unintended consequences.  If we hit at bad downturn with the Fed at zero, that would be uncharted waters.



























abc

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Reply with quote  #172 
http://www.wsj.com/articles/a-bearish-george-soros-is-trading-again-1465429163

Also another famous billionaire investor George Soros has very recently started to take bearish trading positions see article above.  He called the crises in 2007 correctly I believe.


larrywww

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Reply with quote  #173 
I think Zell just has a general lack of ease for the current US market because he believes that cheap financing and unlimited liquidity have distorted the value of many assets.  And he also believes that even though the economic recovery has not been robust, prices for many assets have risen much more quickly than the economy recovery would warrant.  When you have unlimited capital chasing fewer and fewer assets, it's hard not to conclude their value has inflated. This is especially true given how poorly globally the markets are doing----even the emerging markets that normally power growth.  So, he would rather be a seller than a buyer in this type of market.  He believes that the US needs to stimulate its markets so that we can at least achieve the historically normal growth of 2.5 to 3.5%---instead of the anemic economy we currently have.  And Zell believes that real estate investments only make sense in the context of a robust, growing economy.  He specifically mentioned that we have lost alot of the "animal spirits" that powered real estate building and development in the past.

But I also think that he doesn't really have a metric in terms of when the market will turn. Also, it's not like you are seeing monster monthly price increases for real estate right now in most of America, so it's not like 2006/ 2007.   He has refused to label it a bubble, per se, unlike 2006/2007, which clearly was a bubble.  So I don't really think he can specify the time frame with any great certainty.

I think that Zell does think that the stock market is in bubble territory because he doesn't believe that the fundamentals of the current economy support the high valuations in the stock market (although the stock market isn't one of my areas).

But I also think that market volatility, investor skittishness and political instability may magnify the next big economic event into something that may have larger than normal consequences---but who can really predict when the next black swan even will occur?

Can an investor benefit from his philosophy of investing?  I'm not sure to what extent one could---especially since it would require expertise in areas beyond just real estate in this state (or even in this country)---not to mention alot of money and alot of skill negotiating deals in emerging countries.

The only areas that Zell thinks are cheap right now and where he is investing his capital involve oil related products and natural gas---because the prices are lower than the cost of production (under normal circumstances) and likely cheaper in terms of future competition.   By whatever metric you use, these products appear to historically alot cheaper than almost anything else you could buy. Think about what Bruce Norris said about the price of housing in late 2008 / early 2009----are we ever going to see prices any cheaper in our lifetimes?  They are saying the same thing about these type of products right now---that they have hit a floor so low that no one thought that they could get so cheap.  I am no oil expert.  And the problem is that most real estate investors don't know how to invest in this type of market---and I have never invested in these type of markets either.

Other areas that Zell has invested in?  He avoids area where there is too much capital competing for deals.  He invested in a leading Chinese builder a decade ago.  At the time, there was much less competition between investors.  He believes that the "sweet spot" is to invest in developing countries just before they achieve marketability.  He has invested in Brazil, Mexico and Columbia for those reasons.  He especially has invested in manufacturing in Mexico after NAFTA.  He has invested in industrial/warehousing units in Japan, believe it or not, because so much of their stock hasn't been updated.  He has done some net lease deals in China, but otherwise isn't interested in competing there on a large scale---because they are already awash  in too much capital.  China also suffers from a lack of transparency---he thinks their growth is much smaller than what is being represented.  He has invested in Brazil in the past---and even though some banks have lost there money recently----is going back into the country because he believes the fundamentals as a young, vibrant developing economy are present.

In terms of the US market, he indicates that he is a "sharpshooter" looking for individual deals, but isn't really interested in large scale developments---because, again, there is too much capital looking for an investment not to mention declining returns from real estate investments.

What he looks for is an area that has a disciplined work force----and which is on the verge of breaking out as a developing country and/or going to that next level---and a government interested in investment in growth. But there would also have to be liquidity----it does no good if you have cornered the market on an asset class in Uruguay if it is not ripe for investment---and there is zero liquidity, so you have no exit strategy.  He hasn't invested a dime in Western Europe---which he characterizes as a great place to visit---castles, better cheese, and maybe better wine (depends on what you think about california wine)---but labor is overpriced and where no one really wants to work really hard---at least when compared to leading developing countries.   

Zell estimates that his requirement is that his group be successful in 2/3 to 3/4 of his transactions.
But he doesn't rue his losses, if the deal would had an acceptable risk / reward ratio, had it been successful.  Thus, he lost 300 million on the Tribune deal.  But if successful, the deal would have yielded 5 billion.  A 15 to 1 reward is worthy of the risk taken, according to his thinking.  And an investor must be willing to take risks: One of Zell's aphorisms is that a bank should fire a loan officer who never lost money on a loan---it must mean he is shying away from the risky transactions that might be truly profitable.  Risk, so long as it is quantified correctly, is simply part of the investment process.  What disturbs him about the current zero interest fed policy is that it makes it very hard to calculate true risk.  Once you get addicted to zero interest money you start taking unacceptable risks.

Does any of this help us?---or outline an investment plan we can follow?  Not sure about that, unless you are going to expand your skill set and investment range considerably.  But any real estate investor sharp enough to outwit Blackstone (in their huge 2007 transaction) is surely someone worth listening to.

On a personal level, Zell's parents fled Poland in just the nick of time right before the German invasion in WW2----13 hours later, the Germans bombed the railyards to prevent anyone else from fleeing---and the rest of his extended family was never heard from again.

Alot of his investment philosophy is, to some extent, contained in his interviews on Youtube as follows:







And also here:

daveklee

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Reply with quote  #174 
Can anybody share a summary of Robert Campbell's talk at SDCIA (on August 9)?  I'm very curious to hear what his thoughts on where we are in the real estate cycle.
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Reply with quote  #175 
bump

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Reply with quote  #176 
Pretty crazy watching what is happening in Vancouver BC.

They added a new tax to foreign buyers (in response to the large amount of Chinese buyers in recent years).  Many foreign buyers walked away from transactions.  Sales and prices are down dramatically in the last month.  I wonder if the lawmakers that pushed the new taxes expected this reaction.  


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Reply with quote  #177 

- It seems like lending is loosening up a bit. I'm starting to shake my head at some of the loans I see. It's not 2005 ridiculous...not yet at least.

- It seems the FED wants to increase inflation.

- It seems like the FED wants to keep interest rates moving up.

Sounds to me that we could see another party. Lose lending will allow for interest rate increases. The rising rates will push buyers into the market to avoid missing out. More inventory will hit the market as sellers are finally above water and others want to cash in on high prices. Prices will rise with rates and inflation.

I think Bruce predicted something similar.

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Reply with quote  #178 
Gene: Did you hear about what happened in Baton Rouge?  

This wasn't even a hurricane---it didn't even have a name..  This was a tropical depression--but it was also something as rare as a 100 year event---maybe even a 500 year event.
(Although these type of tables aren't really predictive---alot of very rare events have been happening long before they are expected.

There were 60,000 rendered uninhabitable by the flood damage.  Most of these people didn't even have flood insurance---they weren't even in low lying areas where flood insurance would be required.  In East Baton Rouge, only 1 out of 8 homeowners had flood insurance--the other 7/8 did not.

Basically, they received over 20 inches of rain in the space of a few days---and this was a disaster.

The weather forecasters indicate that this was one more sign of global warming----for every degree of temperature of the sea temperature----a rain storm will hold 4% more moisture.


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The Global Real Estate Bubble Is OFFICIALY Bursting

http://economyandmarkets.com/markets/housing-market-markets/harry-dent-the-global-real-estate-bubble-is-officialy-bursting/



kaihacker

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Reply with quote  #180 
Larry,  yea...truely devastating event.  I didn't realize how few had flood insurance.  
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Gene Hacker

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http://RiverLakeRE.com riverlakere@gmail.com

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