Economy

(New York)

The Wall Street Journal says that wealthy New Yorkers are having a hard time believing that real estate prices are falling. After a decade long boom, they have difficulty believing home prices are actually dropping. Nonetheless, they are. Anecdotes abound, especially at the high end of the market, of residents losing millions even after ten-year holding periods. The big question home owners need to be asking themselves is whether New York is a bellwether of what is coming in US real estate, or whether it is just suffering from its own idiosyncratic problems.


FINSUM: In our view, this is mostly a unique-to-NYC problem. It is a combination of oversupply (from new builds), higher tax rates, lower demand from foreign buyers, and rising interest rates.

(New York)

It would be easy to think that real estate is headed towards a buyer’s market. Inventory has been increasing, prices gains have slowed or disappeared, rates are rising, and prices are very high. However, despite all of this, many real estate experts think 2019 will still be a better year to be a seller than a buyer. The reason why is that inventory may only increase slightly, which will keep prices relatively high and not lead to massive price cuts like in the last housing downturn. A recession still looks a little way off, which could also insulate prices as the employment market stays tight.


FINSUM: We think the housing market is definitely going to see prices stay flat or fall next year, mostly because demand is falling as rates rise. However, we do agree that the bottom is not going to fall out by any means.

(New York)

REITs are an interesting sector at the moment. The real estate sector is obviously past peak, and rates are rising, a double whammy for REITs. The initial reaction for many would be “stay away”, however, there is some value to be had. One interesting area is in regional mall REITs, which have actually outperformed the S&P 500 this year. There is a lot of variation in quality between different regional malls, however. In particular, the performance is bifurcating between the very best malls and the rest, with the former thriving, and the rest lagging.


FINSUM: The US has 1,000 malls and some estimates say there is only enough demand to solidly support around 300. The ones that stick around, particularly the top 20, will likely do very well.

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