Commercial real estate has been the focal point of industry watchers looking for a tipping point as the US economy teeters on the edge of a recession.
And for good reason, the FTSE Nareit index of office REITs (real estate investment trusts) has slumped 44% over the last 12 months, more than any other REIT sector that Nareit publishes.
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But new data shows that the residential real estate market is also flashing bearish signs as real estate investors are consistently seeing lower returns on homes they sold in March, according to data from Redfin.
Digging deeper, it appears that investors can expect to lose even more money as some data suggests that the U.S. housing market is severely overvalued.
Research from real estate investment firm Amherst Group, as cited in Forbes, shows that the housing market is overvalue by as much as 40%. Amherst manages $16.8 billion in capital for investors and is one of the country's largest owners of single-family homes for rent with about 44,000 residences across 19 sates.
Is this another 2009 and 2010? We don’t think so, probably not even close. “But when this price condition occurs, the world is a dangerous place," Sean Dobson, CEO of Amherst, said.
He notes that the 40% figure does not apply to the entire country, but rather to nearly 32 cities in 19 states where the firm owns property.
Amherst says that the pricing boom that began at the start of 2021 that drove prices 17% higher through summer 2022 can be blamed on "exotic monetary policy."
"It’s remarkable that even though mortgage rates rose sharply, people still aren’t getting any discount on home purchases. The entry point for the average consumer buying a house isn’t very attractive," Dobson said.
