Rent or Own – What does the stock market say...

The stock market has been screaming “RENT” for at least 6 months!

Math always matters in the end and the math does not pencil out for owning over renting based on today’s pricing. PERIOD!

As I stare out at the San Diego skyline from Coronado I am amazed and concerned at the amount of troubled high rise deals that I see built and underway. How many $800,000 condos can the world digest. Graduating students and young families can’t afford nor want to live in them, and although the country is aging and the dollar is weak, the supply is just too great. I think we are long past the point of digestion.

My uber smart friend Blair and I are constantly discussing the end of this real estate boom. Although our business is lending, we are amazed at the length and strength of this cycle.

As the “nerds” speculate about the web 2.0 “bubble” (NOT), the true “bubble” that is real estate speculation, has begun the long unwinding phase.

If you take a look at the one-year stock charts of any homebuilder (I randomly chose Meritage Homes and Toll Brothers), you will see the unwinding of this boom in the “leading eyes” of the stock market.

PAY HEED!

A this cycle has lasted longer than most, the “newbie” factor is as high if not higher than the stock market boom of the late 1990’s.

The housing boom and unwinding offers MUCH more danger than the stock market boom as people’s net worths have never been more intertwined with their homes.

I do stand by my long standing opinion that the commercial boom will end with foreigners holding the bag. American bankers are still THE BEST at dishing the CRAP to the foreigners at the top. As the dollar is likely headed to much lower levels in the forseeable future, this boom could last a while longer,but I am focused on the apartment and commercial REITs as the boom unwinds.

As proof that the market occassionally makes sense, compare the charts of the homebuilders I linked to above to those of these commercial and apartment REITS – SLG and EQR .

As you can see, not all real estate stocks have cracked.

RENTING WINS FOR NOW!