Real estate funds and REITs have come roaring back since December lows. Even commercial real estate REITs have been soaring since December. Residential REITs (apartments and manufactured homes) have been on a tear this year. But, one wonders, how healthy is the residential real estate market really? There is some evidence to suggest that the residential housing debacle ain’t over.
Actually, residential housing prices are being propped up artificially by the gub’ment (pronounce with your best Michigan Militia accent). Or so says David Rosenberg, the chief economist and strategist at Gluskin Sheff, a wealth management firm in Toronto. Here is an interesting quotation from his Brunch with Dave research report issued today:
“If the Fed stops buying mortgages and the government allows the tax credits to expire as planned at the end of the quarter, then we would expect housing activity to roll over. As it stands, the excess supply of residential real estate and the valuation with respect to wages and rents is still high enough to suggest that a renewed 10-15% decline in average nationwide home prices is in store. That would double the number of households who are ‘upside down’ on their mortgage to 30 million, and add further congestion to the foreclosure pipeline.”
Foreclosures in Q4 were up 18% year-over-year. RealtyTrac, Rosenberg says, forecasts that a record three million homes will foreclosed this year—with the 4.5 million filed—up from 2.8 million in 2009.