Fund News: Stonecrest’s Real Estate Growth Fund – Q3 2019

I was recently at a small real estate conference discussing market outlook. There were a number of diverse opinions as to why the present real estate market is behaving so uniquely.
Everyone agreed that, with high employment and low interest rates, the market typically would be performing better.
Observations: Some feel that because so many homeowners were burned by the downturn or find mortgage payments unaffordable for a comparable home, the new normal is to rent/lease. Additionally, people are staying in their houses about five years longer than they did in 2010, which is reflected in decreasing inventory. This, along with a lower rate of new home development, has contributed to rising home prices over the last seven years. Moreover, wage growth has not kept pace with rising home prices so housing is less affordable, which decreases the buyer pool.

The majority of conference attendees agreed that it’s wise to be cautious as the market goes sideways or down in most areas. However, no one believed that the market was going into a
steep dive.

Stonecrest is targeting properties with larger discounts – purchased directly from consumers. This will help our yield during a flat/down market. Those purchases, though still few in number, should contribute positively to our return in the second half of 2020 as we continue to liquidate our lower margin properties.