Interesting WSJ piece today on the private local real-estate investors — the "smart money."
Guess what? They were the biggest net sellers of property in 2004:
"The rule of thumb for tourists is to always eat where the locals eat. If the same holds true for real estate, investors should consider selling.
Private local real-estate investors as a group were the biggest net sellers of property last year, selling off about $4.5 billion more than they purchased, according to Real Capital Analytics Inc., a New York real-estate research firm. Their aggressive selling spree began about a year ago, shortly after interest rates began rising last April, and continues today.
Some of these sellers are reinvesting the proceeds of their sales into development or redevelopment projects or in markets where competition for properties is less fierce. Others are holding off on reinvesting money in real estate or are deciding to simply pay the capital-gains taxes on their property sales.
Real Capital President Robert White Jr. says he can tell whether a market has gotten overheated by paying attention to these investors. "They’re not motivated by fees or allocations and they’re very entrepreneurial," he says. "They have total freedom to invest across property types and markets and traditionally have led the market."
Again, I feel compelled to point out the difference between a full blown bubble and an extended asset class.
Administrative Note And yet another category gets added: Real Estate
Sell Sign? Local Real-Estate Investors Bail Out
THE WALL STREET JOURNAL, April 6, 2005; Page B6