Behind the Resurgence of Commercial Real Estate

The return of home renters are any investor’s dreams, especially where decline in home ownership or renting has been stagnant for some time now. The current multifamily market is responsible for the current turnaround and will keep investors more hopeful for a possibility of full recovery. CEO’s like Sam Zell, whose advice you should take with a grain of salt, believes the multifamily market will continue to prosper regardless of any construction stalls or lack of interest for single family homes.

Stock indexes like Standard & Poor’s 500 Index have seen major surges that are predicated to the real estate market. Companies like the Thomas Properties Group, DuPoint Fabros Technology Inc, LaSalle Hotel Properties SBI, and Resource Capital Corp have exhibited price appreciation from August to September. Although, not all of these companies reside on this particular index, however, you should take look into the possible opportunities that present themselves as investors in Real Estate since these opportunities may not present themselves again at these prices (Warren Buffet).

Indeed, the rise of fixed mortgage rates, lower levels of delinquency, and positive market news is predicated on the resurgence of multifamily commercial estate market. The 30-year fixed mortgage rate is the highest it has ever been in two years, as executives, such as Chad Wandler, from federal agencies like Freddie Mac have indicated through media news. In fact, another indirect boost to the demand for multifamily housing is the rising prices of homes along with increasing rates. “According to the most recent figures available, the S&P/Case-Shiller home price index was up 12.2% in May compared to a year ago.”

Even in anticipation of Government buyback programs, executives from Freddie Mac and Fannie Mae see no reason to believe that demand for multifamily homes will remain high, even with rising rates and prices for homes. REIT’s investors are thrilled with news that the Government will continue to stimulate the Mortgage market, as last month the S&P index saw a 14% boost. Just keep in mind that these federal agencies combined own about 80% of commercial loan contracts distributed throughout the United States.

Some Key Points I Highlighted
• Fixed rate, long term, 30 year mortgages are the highest in two years
• Price for homes are increasing, thus resulting in decline in single family market
• Government buy-back programs are good news for security holders
• Price appreciation in stocks that provide investment opportunities
• Multifamily commercial estate will provide a security blanket for entire market

The ultimate beneficiaries of multifamily housing are owners and landlords of these complexes, thus adding more cash & cash on hand from their investment. Ultimately, contributing to the economy and creating more jobs as permits have increased to build more multifamily homes. Furthermore, these projections are expected to increase as well into the New Year. So I am a firm believer that there are indeed opportunities in these investments, especially with smaller cap companies, which I will touch upon on the sequel of this document. So let’s all hope that another bubble is not possible, and prepare for such an event.