March 8th, 2011 by Marco Santarelli
Ackman argues that Single Family Home Rental Properties possess the identical investment attributes that strongly performing stocks typically possess. Says Ackman:
We believe we’ve identified an investment with:
- A low valuation – The lowest valuation in at least a generation.
- Forced sellers – A large number of distressed transactions.
- Extremely attractive financing available – High loan-to-value, low-rate, fixed-rate, long-dated, non-recourse debt, pre-payable without penalty.
- Favorable long-term supply dynamics – Short-term oversupplied market, but long-term supply is controlled.
- Favorable long-term demand dynamics – Demographically driven demand growth.
- Out-of-favor – Currently, this is a somewhat shun asset class.
Ackman’s bullish perspective flies in the face of the pervasive pessimism about home-buying. “Experts Say Housing is a Lousy Investment and it Always Will Be,” an August 2010 headline on Yahoo! Finance declared. “The US Housing Market is Headed for a Complete and Total Nightmare,” another financial news service predicted. And just last week, a CNNMoney.com headline warned: “Why Home Prices Could Fall Even More.”
“There’s a substantial risk of home prices falling another 15%, 20% or 25% more,” chimes in Robert Shiller, a Yale economist and half creator of the Case-Shiller Index of home prices.