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The Real Estate Reality Show

At GowerCrowd, we take a realistic view of commercial real estate investing, providing pragmatic insights for passive investors who are looking for sponsors they can trust and opportunities they can invest in. You’ll find no quick fixes or easy money ideas here, no sales pitches, big egos or hype. Real estate investing for passive (accredited) investors is turning messy with vast swathes of loan maturities approaching which is going to send many sponsors into default causing their investors to lose capital. While this is nothing to be celebrated, it will also bring in a period of wealth transfer and opportunistic investments. We’re here to guide you by looking at the harsh realities of real estate investing, examining the risks and the rewards in conversations with some of the world’s top experts so you can make informed decisions. You’ll learn how to build your wealth while protecting your capital investing as a limited partner in commercial real estate investments, even and especially during an economic downturn. Each week we add new episodes that provide you with access to the foremost specialists in commercial real estate investing with a focus on discounted distressed real estate and the associated market dynamics. We provide interviews and explainer videos that dive deep into the trends driving today's real estate industry, how the economy impacts returns, how to access and invest in distressed real estate deals, and how to protect your capital by mitigating downside risks. There’s no doubt that it is a very challenging time right now for the average investor. With the impact of COVID still being felt and the era of record low interest rates behind us, commercial real estate is experiencing severe headwinds. This creates financial distress for many CRE owners who did not include contingencies in their original business plans and who now face dramatically increased debt costs, increased construction and maintenance costs due to inflation, and reduced revenues from rents as the economy slows down. Is the commercial real estate world on the cusp of a major correction? Is it 2007 or 1989 all over again? Will passive investors (limited partners) who have invested in syndications (through crowdfunding or otherwise) see losses they had not predicted? How can you access discounted real estate opportunities this time around that were only available to a select few during prior downturns? Let us help you prepare your real estate portfolio no matter what the future holds, whether it be business as usual for real estate investors or a period of wealth transfer where those less prudent during the good times, lose their assets to those who have sat on the sidelines, patiently waiting for a correction. Be among the first to know of discounted investment opportunities as the market cycle plays out by subscribing to the GowerCrowd newsletter at https://gowercrowd.com/subscribe Subscribe to our YouTube channel: ⁠⁠⁠ https://www.youtube.com/gowercrowd?sub_confirmation=1 Follow Adam on Twitter: ⁠⁠⁠ https://twitter.com/GowerCrowd Join the conversation on LinkedIn: https://www.linkedin.com/in/gowercrowd/ Follow us on Facebook: ⁠⁠⁠ https://www.facebook.com/GowerCrowd/ *** IMPORTANT NOTICE: This audio/video content is for informational purposes only and should not be regarded as a recommendation, an offer to sell, or a solicitation of an offer to buy any security. Any investment information contained herein is strictly for educational purposes and GowerCrowd makes no representations or warranties as to the accuracy of such information and accepts no liability therefor. Real estate syndication investment opportunities are speculative and involve substantial risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital. Past performance is not necessarily indicative of future results. GowerCrowd is not a registered broker-dealer, investment adviser or crowdfunding portal. We recommend that you consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity. Unless otherwise indicated, all images, content, designs, and recordings © 2023 GowerCrowd. All rights reserved.
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Now displaying: Page 1
Feb 28, 2017

Past performance is not a guarantee of future results.  This boilerplate disclaimer is standard wording for just about any financial investment we might make, but when it comes to buying a home, as sensible as this pithy phrase may be, it is often disregarded.  Home buyers tend to be driven by the idea that because prices went up last year, they must go up next year.  Their belief in future price rises is often driven by watching past performance of the market, and buying is motivated by a belief in anticipated future price appreciation.  Same goes for speculators who, seeing a steady upward trajectory in house prices, assume that this is also a guarantee of future increases in value.

To be sure, there are some fundamental factors that drive price increases, but without being specific about what caused last year’s price rises, how can the buyer be so sure that that prices will go up next year also?  Or the year after, or the year after that?  or, indeed, that prices won’t go down?

My guest today is professor Charles Nathanson who received his Ph.D. in economics from Harvard and who is currently assistant professor of finance at the Kellogg school of management at Northwestern University.  A link to his full bio is at www.nreforum.org and the papers we discussed today are An Extrapolative Model of House Price Dynamics and Speculative Dynamics of Prices and Volume.  Professor Nathanson’s research in these studies provides some fascinating – and actionable – insights into what to look for to better assess if there is still upward momentum in pricing or if you are buying at the top of a bubble.   

Here are my takeaways from Professor Nathanson’s research.   In order to understand what is going on with recent house price increases, we need to know what prior buyers believed when they bought their houses.  If they bought under the assumption that prices were going to rise, then their decision may have been irrational and so, possibly, pushed up prices disproportionately to market fundamentals.  One way to measure this is to assess what proportion of those increases were driven by house flippers.  Brokers should be able to give a sense of this in their own geographical areas.  If they are reporting a preponderance of such activity, this might be indicative of being in the later stages in the cycle. 

 Also compelling is the idea that transactional volume alone is a precursor to where pricing is likely to go.   Finding data for transactional volume should not be too difficult, and if one sees a tailing off of volume, it may be the first sign that pricing is also about to stop rising and may be on the way down.  Professor Nathanson was reluctant to come to this conclusion without further research, but, again, as a metric to watch for it seems to me that it has some utility.

If you have enjoyed this podcast please tell your friends and colleagues and point them to our podcast page www.nreforum.org/podcasts where they can find the links to subscribe.  Again, thank you for listening today. 

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