Tags: Real | estate | bubble | market

Real Estate Heavyweights: There's No Bubble

By    |   Thursday, 16 October 2014 02:15 PM

In recent months, there has been no shortage of financial commentators warning that real estate is in a bubble, but some of the industry's heavy hitters beg to differ.

Low interest rates and reasonable valuations continue to make real estate an attractive asset, they says.

"We don't think there's a broad-based bubble in the real estate market today, nor do we think there's one coming in the next year or two," Chris Graham, senior managing director at renowned Starwood Capital Group, said at a real estate conference this week, CNBC reports.

"There's still room for upside here."

Paul Vosper, co-head of the Morgan Stanley Alternative Investment Partners Real Estate Fund, has much the same view, according to CNBC.

"While these assets are fully priced," he said, referring to top markets such as New York City and London, "we are not in a bubble as that would require an extensive expansion in debt." Lending may be going up, but "there is still discipline in the credit underwriting of that debt."

Mike Kelly, director of U.S. real estate commingled Funds at J.P. Morgan Asset Management, also doesn't believe there is a real estate bubble.

"It's certainly a competitive market," he said at the conference, but added that other asset classes aren't as attractive.

"When we look at the spread between the 10-year Treasury, which today is around 2 percent, and a 6 percent [investor rate of returns] on a very good quality piece of real estate, we think that spread is attractive," Kelly explained.

Meanwhile, the housing market has showed some signs of weakness in recent months. The S&P/Case Shiller 20-city composite home price index fell a seasonally adjusted 0.5 percent in July, the third straight month of decline.

"While the residential real estate market has definitely gotten better, which is good for the U.S. economy, it has not fully recovered," Wells Fargo CEO John Stumpf said on an earnings call this week, Bloomberg reports.

"I believe there are several factors holding the housing market back from a complete recovery," such as sluggish household formation, high student debt levels, low inventories and tight credit conditions, he said.

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In recent months, there has been no shortage of financial commentators warning that real estate is in a bubble, but some of the industry's heavy hitters beg to differ.
Real, estate, bubble, market
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2014-15-16
Thursday, 16 October 2014 02:15 PM
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