From Our Boots on the Ground

Here's an email from a member within the mortgage industry who has provided excellent insight into what is happening on the ground vs. what we see in data that is constantly revised. This is his industry, he knows it well and knows what trends are emerging. In response to my earlier post on real estate, here' what he sent in an email message.

"Remember that I said the mortgage market part of the real estate industry remains soft and that a lot of the recent sales have been investors buying REO’s with cash.  I continue to see this and furthermore, some of these  investors are looking for returns to build a base of income should their jobs suddenly disappear.  Rather than invest in the stock market or bonds, they are looking for rents to give them something to fall back on."


There's a few ways to look at this, I know investors who pick up property for rentals. In the past, they leveraged the equity to buy more. Even now as prices are much lower, they are yet to jump aggressively into the mix, but they are picking up properties here and there. 


What I take away from this email is the fact that longer term investors, many of which prefer tangible assets to stocks, are not looking favorably on the market' returns in the long run and who can blame them. From an earnings standpoint in comparison to the past, and considering stubbornly persistent unemployment and the trend toward renting as many feel the real estate market will not bottom any time soon (it is in a double dip in many regions) or they have no other choice due to foreclosures, it seems tangible assets are going to be an emerging trend. There are certain REITS that I'll take a look at.