Salient to Investors:
Mark Kiesel at Pimco said:
- US industries tied to housing will grow 4 times as fast as the economy, making them top picks for investors.
- Housing starts will increase 15 percent a year until at least 2015
- Home prices will rise over 5 percent annually as demand recovers from the worst real estate crash since the Great Depression.
- The economy will grow 4 percent in nominal terms, and less than 2 percent when adjusted for inflation.
- Housing will surprise people on the upside, but the best way to play it is not the homebuilders.
- We own banks, a play on reflation. Not enough investors have inflation hedges – housing is one effective inflation hedge.
- The Fed will win and will expand the balance sheet until housing prices go up – don’t bet against central banks.
Esmael Adibi at Chapman University said the US unemployment rate must decline for the real estate market to sustain growth because investors are not real demand, which is driven by job creation and household formation.
Emile Haddad at FivePoint Communities said deliveries of new homes have been slowed by builders and developers not having enough land prepared to meet demand, especially in places such as California, where land prices have soared in the past year as builders compete for property. Haddad said the next cycle will be driven by lack of supply more than by demand.
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