Real Estate Hedge

You can put on your hedge using apartment REITs, but they are saying that NYC apartments are going to fall by 60% from present levels using cap rates vs. NYC rents less maintenance/cc vs. apartment prices. Do the math yourself.

So essentially, you can hedge now, but your locking in another 60% drop when you short the apartment REITs at the current prices (EQR at 20, AVB at 42, etc...).

Seems to me the cheaper thing to do is to hedge long the REITs, sell any NYC apartments you have at the current price, and rent your primary residence. There is no value in buying NYC apartments with cap rates of 4% when EQR and AVB have implied cap rates of 9 to 10%.

Good luck as the real estate agents like to say...

But that's implying I can sell my NYC property at a cap rate of 4%. With rents at a free fall and sales market non existent, I would think sales can reach 7 cap easily. With the barrons article about pine at potentially 650 dollars a sq ft, that implies a 6 cap aggressivelyvspeaking.

Not quite sure if buying eqr is a hedge long if I have already sold my apt. Seems more of an outright play that I believe I have seen the bottom of the rental market. I'm more in the camp that rental rates will continue to dropoff significantly despite the trend towards rentals. Also I think we have yet to see the serious delinquencies with overall rents. Going long on real estate on any level or financials seems more of a death trade to me.