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Real Estate Expert Looks To Future
Kenneth
Heebner, who since 1994 has managed the $1.2 billion CGM Realty
Fund, has the best 10-year record of all real-estate-focused mutual
funds, according to fund tracker Lipper, Inc. Heebner’s fund is up
an average of nearly 22% a year during the past decade...greater
than double the broader market.
Heebner, 65,
recently looked at the real estate market in the U.S. and offered
this thinking...
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A
significant decline in housing prices is coming, as a buildup of
inventories is taking place. Major retrenchment will occur in
the hot markets of California, Arizona, Florida, and up the East
Coast. These markets could well fall 50% from their peaks.
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As housing
prices fall more people will be under water (those who got 100%
financing), and they will be forced to walk away from their
homes. The inventories of unsold homes grow dramatically with
these foreclosures, and large price declines will follow. Such
events will create a very difficult environment for home
builders, too.
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The large
declines in the hot markets will reduce the growth rate of the
economy, but they won’t precipitate a downturn. The Fed will
probably pause on interest rate-hikes once the extent of the
housing slowdown becomes apparent, rather than threaten an
economic downturn.
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As the
global economy strengthens, leisure travel will continue to be
strong. And the U.S. will see more tourism, because with the
dollar weakening it will be less expensive for foreigners to
visit America. Consequently, during the next several years there
will be an inadequate supply of hotel rooms available for all of
the travelers’ demands.
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