Bone-Chilling “Plateau” in Apartment Boom Resurfaces, Smartest Money Bails Out…”Last time a “plateau” was declared, the market crashed.”
by Wolf Richter
WolfStreet.com
December 17, 2015
Legendary real-estate bottom-and-top picker Sam Zell, chairman of apartment mega-landlord Equity Residential, got on Bloomberg TV and said, “There is a high probability that we are looking at a recession in the next 12 months.”
This is not even a remote possibility in the Fed’s miserably slow-growth forecasts it issued yesterday. But Zell was once again having a will of his own. He offered a laundry list of reasons: Multinationals are announcing mass-layoffs; global trade is deteriorating; China’s economy might be spiraling down; and “the strong dollar” is hitting US production.
But he said this only after he’d unloaded a ton of commercial real estate: in total 23,262 apartments in five states. The deal was announced at the end of October. Another 4,728 apartments are to be dumped next year.
As his firm pocketed the $5.4 billion it got from Starwood Capital Group for these units, Zell said: With “pricing currently available in the commercial real estate market, it is very hard not to be a seller.”
And prices for office, retail, and apartment buildings are in the most phenomenal bubble ever: up 10% this year through November, according to the Green Street Commercial Property Price Index, after having already jumped 10% in 2014. They’re up 100% from May 2009. They’re up 23% from September 2007, the peak of the insane bubble that blew up. Even on an inflation-adjusted basis, prices are now 12% higher than they’d been during that propitious peak of the bubble:
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