Equities catching up to real estate

I agree that it is unusual, but may be a sign the economy isn't quite as strong as it seems to be. I read an article recently which claimed the strong numbers are merely because of increased government spending, which when coupled with decreasing revenues/increasing deficits is unsustainable.

I think Manhattan real estate problem is really oversupply at high-end with prices more than $3k per sq ft with prices already down 15-20 percent from the peak. Perhaps more to go to clear the oversupply.

For $1000-1500 per square ft there is no excess supply and prices are down 2-3 percent from the peak using Streeteasy and Urbandigs matrix. Barring recession, I see limited downside in this segment especially with Amazon and Google expanding. Press is negative as the writers are too focused on new developments and do not differentiate between different price segments.

Equity market driven by tech valuations had become more like top end new development and some air has come out.

So really three different markets which will correlate much more in a recession but not so much when the economy is fine.

Keith,
I think this article supports your theory:

The National Association of Home Builder’s confidence index drops the most in four years
https://www.marketwatch.com/story/dow-poised-to-kick-off-holiday-shortened-week-lower-2018-11-19

If you look at the chart going back 25 years, it looks like this index has been more of a leading indicator than the stock market to the 2 big real estate market down turns over that period:
https://tradingeconomics.com/united-states/nahb-housing-market-index

In New York, real estate investors will still hold to the fact that this asset is non mark-to-market - they hold the asset- they have a tenant paying rent building their equity and forget about it. Also on a margin account you can borrow at 8-10% while real estate is still the only asset against which you can borrow at 3-4%, just the power os this cheap leverage has value

Non mark to market and depreciation indeed favor real estate. However, these days, you can get very low margin rates - below mortgage rates - at interactive brokers. Of course, in real estate you do not get a margin call due to falling asset prices as long as you pay your mortgage.

The problem is that the returns on Real Estate are mostly below mortgage rates and investors buying deals with the hope that increasing rents are finding that a lot of the supposed rent increases are fictional once you factor in concessions - which have continued to grow at alarming rates.

Days on market at 90 now, hmm.. highest it's been in a long time

I remember when the dot com stocks crashed in 2000. After that the real estate market started going up. Some people put their money in real estate after the crash. Of course one can't conclude this was a reason for the upward trend in real estate.
It seems that the equity markets may go down a lot more. Cramer said today that people should sell their stocks if they think the Fed will raise rates in December, and that one will not be able to buy at these prices. I've read so many people indicating that this market is bad.
Don't know how this will affect the real estate market if the equity markets keep going down.
The yield on the ten year has gone down in the past few weeks and as a safe haven will go down more; good time to get a lower rate.

Rate are indeed 20bps lower from a few weeks back. Back close to 3 percent in 10y. I think Fed will indeed increase in December but am not sure about any further increases.

I think this is backwards - equities have been leading real estate for the past decade. SPY is up almost 4x in 10 yrs. Real estate has definitely not quadrupled in that time.

Real estate is much less volatile than equities. Estimates are probably a quarter to a third of the volatile of equities. So even if real estate and equities to be highly correlated, which Is far from true expect in deep recession, you would only expect real estate to be up 100 percent and then you need to adjust for the fact the low print in real estate unlike equities is not observable.