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Pundits and Predictions...contradiction abounds

Pink Magazine a business women's publication wrote in the May issue that investing in REITs (Real Estate Investment Trusts) is a great idea for women without the time to buy property and watch it themselves. Did the writer of that article read ANYTHING about REITs before writing that? Not to mention that a small commercial property is not time intensive. A trusted broker or manager will handle the leasing, trusted subcontractors, plumbers, construction, electricians will handle the repairs that are not the tenants' responsibility.

REITs can be a great investment but when a leading REIT like Prologis starts shedding assets, it's a different world. Part of the argument that Pink Magazine made for investing in a REIT is that it's a time saver, but it's still a stock, without an understanding of the REIT's holdings, the market trends for their property type and the economies and vacancy rates in the markets where the REITs have holdings, an investor is still flying blind. Now is not the time for a real estate novice to invest in a REIT, not without having solid knowledge of market trends and demand.

On the residential front, pundits believe that we are hovering near the bottom of the market. Fewer homes are on the market this spring selling season than there were last year. Less inventory is a traditional sign that the bottom is here. Nationally, homes have declined in value 14% and in some areas, such as Portland Oregon and New Orleans values have actually risen two to three percent.

In Connecticut, Gold Coast Towns like Greenwich, New Canaan and Darien as well as waterfront homes have seen larger declines in value than middle class suburban towns. Outside Hartford, Avon and Glastonbury have also seen declines in value around 15% compared to 11% in towns like Guilford, Madison and Branford.

Foreclosures remain the wild card in the housing market. Currently, banks own about 765,000 homes nationally. Some predict that the number will rise to more than a million over the next ten months. Bankers don't want to be in the real estate business so that number may cause another dip in home values but what will actually happen remains to be seen.

In the commercial markets throughout Connecticut, retail and office properties are still in the most volatile position while light industrial properties and leasing is brisk.

May 14, 2009

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