As billionaire real estate investor Sam Zell puts it, we’re in the “eleventh inning.”
I’ve been paying close attention to people like Zell, Simon Black, and Ken McElroy lately.
There is one thing they have in common and that’s there shared outlook on an impending downturn in the economy.
By no means is this a novel idea. Simply stated, it’s just a matter of time. We’ve been on the steady uptick for almost a decade. What goes up, must come down.
If we study Zell, we see that he’s selling off billions worth of assets.
And he’s gone on the record recently stating that we’re just ahead of a “tsunami of supply.”
As I go through and re-read and study my dog eared, highlighted and underlined Urban Land Institute (ULI) study on Emerging Trends in Real Estate (2019), I feel like a miner.
Searching for that clue, that will only be obvious in retrospect five years down the road.
The uncertainty revolves around the question of when?
When will we experience another “Great Recession” like in 08-09?
The certainty is found in the fact that many assets are trading at a premium.
The fact that too much capital is chasing too little opportunity.
The ULI study states, “Lots of people-especially the ones controlling the purse strings on acquisition and development finance and investment – think the only responsible thing to do is to behave as if a downturn is inevitable somewhere near that horizon line, mitigating risk as they recognize its opacity.”
Another trend that I’ve been experiencing is how homeowners have become very comfortable with real estate.
I’ve been told a few times recently that, “we’ll just wait for the market to go up before we sell.”
Unfortunately, these responses have not been calculated and well researched, instead, reactionary in nature suggesting that they simply expect things to continue to rise.
Blindly…
Like with many arbitrary decisions, their estimations are short sided.
Conversely, there is significance to being a consummate student of life.
We can look to the time tested track record of people like Zell, and McElroy.
Those who have lived through the cycles.
Where complacency is the enemy of opportunity.