Thursday, August 31, 2023

Multi-family apts priced 10%-15% too high relative to bonds

 Using logic straight out of Chapter 9, the NYTimes suggests apartments are mis-priced:

Owning commercial property is a bit like owning a corporate bond, only slightly riskier: You bet on the solvency of a tenant, with more uncertainty about the value of the capital you’ll get back. For at least the past 20 years, investors in U.S. real estate have required a return premium of 1.9 percentage points over the yield on investment-grade corporate debt, according to Green Street’s director of research, Cedrik Lachance.
Right now, real estate only offers a 1.3 percentage point premium. For the relationship to return to normal and make property attractive again, U.S. real-estate prices need to fall a further 10% to 15%.


  • All real estate is local and this refers to National data.  
  • If I really knew, I wouldn't be teaching school and I probably wouldn't tell you.  

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