Zelman on housing

[Dinar]

2 hours ago, Gmthebeau said:

no I don’t know over the past 15 years.  It’s reportedly 20% annually since 1983. 

Do you by chance have a source?  The reason that I ask is because a friend used to work at a very large pension fund (100bn+.) He told me that in 2020, they were offered an opportunity to invest in Baupost, and when they looked at the returns, they were not impressed, and passed on it.   I was very surprised because of Seth's reputation but neither he nor his boss are fools.  

[Gregmal]

Quoting Seth Klarmans performance the last decade thinking it’s good:

 

[Gmthebeau]

9 hours ago, Dinar said:

Do you by chance have a source?  The reason that I ask is because a friend used to work at a very large pension fund (100bn+.) He told me that in 2020, they were offered an opportunity to invest in Baupost, and when they looked at the returns, they were not impressed, and passed on it.   I was very surprised because of Seth's reputation but neither he nor his boss are fools.  

 

This is just what a friend told me.  You need to consider that the last 15 years was a raging bull market essentially from the bottom in 2009.   We started at a very low valuation in 2009.  Today valuations are near extremes.   Firms who manage risk will not do as well during raging bull markets.  They will clean up when the tide goes out.

[Gregmal]

Interesting. This seems inconsistent with the prior claim that I should Google Seth Klarman and take notes on how he buys the bottom of every market dip and sells at the top and cleans up on every 10-20% fluctuation...but what do I know...its just what a friend told me. Should ask him if he knows what "mooning forever" means. 

[Dinar]

1 hour ago, Gmthebeau said:

 

This is just what a friend told me.  You need to consider that the last 15 years was a raging bull market essentially from the bottom in 2009.   We started at a very low valuation in 2009.  Today valuations are near extremes.   Firms who manage risk will not do as well during raging bull markets.  They will clean up when the tide goes out.

S&P 500 return from 12/31/2007 through today was 9.58% per annum, in line with 100 year history.  Do you know what the Firm's 2008 and 2009 returns were?  

[Gmthebeau]

7 minutes ago, Dinar said:

S&P 500 return from 12/31/2007 through today was 9.58% per annum, in line with 100 year history.  Do you know what the Firm's 2008 and 2009 returns were?  

 

No, I don't know or care.  Why is it so important to you?  If you want to invest with them just contact them and see if they are open and they will provide you the information.  I know they manage risk.  Does the S&P manage risk?  No, it is simply an index of large corporations and it will go up and down based on earnings, economics, and human greed/fear.  Over time it will go up as long as the earnings grow.  Being 100% invested in an index is a fine choice if you are comfortable with riding the ups/downs.  Not everyone takes that approach.  It's all an individual decision.  Many people would not sleep well at night if they lost 50% of their money which the S&P 500 could easily do.

[Dinar]

4 minutes ago, Gmthebeau said:

 

No, I don't know or care.  Why is it so important to you?  If you want to invest with them just contact them and see if they are open and they will provide you the information.  I know they manage risk.  Does the S&P manage risk?  No, it is simply an index of large corporations and it will go up and down based on earnings, economics, and human greed/fear.  Over time it will go up as long as the earnings grow.  Being 100% invested in an index is a fine choice if you are comfortable with riding the ups/downs.  Not everyone takes that approach.  It's all an individual decision.  Many people would not sleep well at night if they lost 50% of their money which the S&P 500 could easily do.

If you hold someone as worthy of admiration as an investor, you should know what his or her returns are, relative to risk that he or she has taken.  

[Gmthebeau]

12 minutes ago, Dinar said:

If you hold someone as worthy of admiration as an investor, you should know what his or her returns are, relative to risk that he or she has taken.  

Ok, you invest your money as you see fit and I will do the same.  It was meant to be an example of managing risk.  I could have said Buffett or someone with a public record.  Whatever. Good day.

 

btw, did you stop and think if I knew his returns I wouldn't be publishing them on here without his permission?  

 

Edited July 5, 2023 by Gmthebeau

[Gregmal]

[thepupil]

On 7/4/2023 at 9:11 PM, Gregmal said:

Sup my man. You ve been low key last few months…hope you’re not getting crushed by the residential real estate collapse happening virtually no where in America. 

 

ya…just hanging out in the soup line after all my losses

 

[Gregmal]

28 minutes ago, thepupil said:

 

ya…just hanging out in the soup line after all my losses

 

 

Haha what’s nice is that when you’re a winner even the soup kitchens have Michelin stars. 

[UK]

https://www.wsj.com/economy/housing/the-fall-in-home-prices-may-already-be-over-3496d6bb?mod=hp_lead_pos1

 

Swonk is one of those who didn’t see this coming. In late 2022, she called for home prices to fall 20% nationally this year. Now, she says, prices are likely to end the year up slightly from last year.

[UK]

 

https://www.wsj.com/real-estate/americas-biggest-landlords-cant-find-houses-to-buy-either-ea893213?mod=hp_lead_pos2

 

“The reality is the rental-rate increases, as aggressive as they’ve been, have not kept up with home-price appreciation,” he said. 

 

 

[UK]

https://www.wsj.com/economy/housing/wall-street-thinks-americas-homes-are-overvalued-435e9c42?mod=hp_lead_pos6

 

U.S. single-family properties are the only type of real estate that has increased in value since interest rates began to rise in March 2022. After a brief dip in the months after the Federal Reserve’s initial hikes, house prices resumed their climb. Residential property values reached a record in July, based on the latest numbers from the S&P CoreLogic Case-Shiller Home Price Index.

...

Listed real-estate investment trusts that specialize in single-family homes, such as AMH Homes and Invitation Homes, have either slowed their buying or become net sellers. For big corporate landlords that want to grow their portfolios, a better option than paying today’s high prices on the open market may be to build new homes from scratch.

...

The stock market is flashing another warning sign for house prices. Shares of U.S. single-family housing REITs trade at a 20% discount to their gross asset value, according to Green Street’s director of research, Cedrik Lachance. This is an indicator of where shareholders think the value of the homes in these companies’ portfolios are headed. Investors may be underestimating the housing market, though. There is a shortage of single-family homes in the U.S., versus a potential glut of apartments if all the projects currently in the pipeline actually get built. Rent growth is stronger for single-family homes than apartments.

 

Another reason why apartment values have corrected and single-family home prices haven’t may simply be who owns them. Corporate landlords own 68% of apartments in buildings with 100 or more units but only around 3% of America’s individual family homes. Big institutional investors “are typically focused on cash returns as well as changes in economic and financing conditions,” says Cohen & Steers analyst Jordan Flannery. For regular home buyers, these factors are only part of the purchasing decision.

 

Edited October 4, 2023 by UK

[Gregmal]

7 hours ago, UK said:

Shares of U.S. single-family housing REITs trade at a 20% discount to their gross asset value, according to Green Street’s director of research, Cedrik Lachance. This is an indicator of where shareholders think the value of the homes in these companies’ portfolios are headed

Those experts also bid DHI do like $70 last year and one Im pissed I didn’t pull the trigger in, FOR to like 40% of book. It’s really just another example of how quirky short term can get when the end product(listed stock) is basically just some vehicle for every two bit chump to gamble on a macro trade.
 

Housing cant break because the Fed trapped everyone. My area is probably the poster boy for this. Not a ton of space to build, but there is some. Most of it though is zoned for AG or non residential use. The cost to build is too prohibitive, so no one is doing that. Inventory of homes is down 60% from pre COVID. People have both huge amounts of equity and sub 4% mortgages…the hell they’re ditching those. Easier to just tap a heloc if need be. Prices keep rising. Despite what the people staring at stock prices have to say.

Edited October 4, 2023 by Gregmal

[Spekulatius]

Could be fun for current home buyers to get trapped into a 7.5% + mortgage that they can't refinance because the equity melts away.

[RedLion]

On 10/4/2023 at 7:59 AM, Spekulatius said:

Could be fun for current home buyers to get trapped into a 7.5% + mortgage that they can't refinance because the equity melts away.

It’s really tough to qualify right now though, agreed it won’t be fun, but presumably if you’re taking a mortgage right now I’m assuming you’re putting at least 20% down. 

[Spekulatius]

10 hours ago, RedLion said:

It’s really tough to qualify right now though, agreed it won’t be fun, but presumably if you’re taking a mortgage right now I’m assuming you’re putting at least 20% down. 

Sure, but to refinance into a confirming mortgage , you still need to have 20% equity with an appraisal. So if the value of your home goes down, you can’t refinance with lower interest rates into another conforming mortgage unless you inject more equity to reduce the balance. That’s something that happened to homeowners during and post the GFC.

Edited October 7, 2023 by Spekulatius

[RedLion]

5 minutes ago, Spekulatius said:

Sure, but to refinance into a confirming mortgage , you still need to have 20% equity with an appraisal. So if the value of your home goes down, you can’t refinance with lower interest rates into another conforming mortgage unless you inject more equity to reduce the balance. That’s something that happened to homeowners during and post the GFC.

Right this makes sense. I’m not doubting you, I’ve actually been buying real estate lately and even took an 8% loan to buy one at 75% ltv.  But I’m concerned about this very scenario. My investment properties purchased this year are only at about 21% ltv based purchase price and less based on current after repairs fair market value. My goal is to keep below 60 ltv so I’m able to refinance if rates and prices fall together. 

[Gregmal]

My rule of thumb is that the rental income needs to cover the mortgage payment and HOAs if applicable. That’ll tell you what your LTV should be, at a minimum.

Edited October 7, 2023 by Gregmal

[RedLion]

On 10/7/2023 at 5:02 AM, Gregmal said:

My rule of thumb is that the rental income needs to cover the mortgage payment and HOAs if applicable. That’ll tell you what your LTV should be, at a minimum.

That’s pretty much what I’m thinking overall. Focusing on higher end real estate that’s still covering the piti so that dictates a lower ltv than higher cap rate properties. 

[Spekulatius]

Cost to buy vs rent at record level:
https://www.wsj.com/economy/housing/theres-never-been-a-worse-time-to-buy-instead-of-rent-bd3e80d9?mod=economy_lead_story

 

[sleepydragon]

52 minutes ago, Spekulatius said:

Cost to buy vs rent at record level:
https://www.wsj.com/economy/housing/theres-never-been-a-worse-time-to-buy-instead-of-rent-bd3e80d9?mod=economy_lead_story

 

true but unfortunately buying is more expensive now also because there are still people willing to pay this price and sellers asking whatever they want.
 

[ValueArb]

 

[Spekulatius]