Just taking a superficial look at economic events over the last six years or so, you might think this is a great time to invest in land and housing.
You would be right, of course, but you’d need much better analysis before making any serious decisions.
I just had an opportunity to get that analysis from a real industry veteran. Art Falcone of the Encore Housing Opportunity Fund appeared on the show to talk about the market and how his company is playing it.
Art will be the keynote speaker at IMN’s Real Estate Private Equity Forum on Land & Homebuilding (East), set for April 22-23 at the Ritz Carlton South Beach in Miami.
For the last four years, Encore has been investing in distressed real estate across the country. The company owns many master-planned communities, but in 2008-09 it also started building condo towers and multifamily rental properties in several states.
Land prices, Art said, have recovered greatly depending on your location in the country. The Northeast has actually seen price levels surpass the highs of 2005-06, as has San Francisco. South Florida and Orlando have also seen a nice recovery, and Fort Myers, Tampa, and Jacksonville are lagging but moving in the right direction.
Encore has invested about $1 billion in the last four years, Falcone said, mostly in bankruptcies and foreclosures of master-planned communities and condo towers. Deal sizes range from $20 million to $200 million.
I asked Art about the inevitable rise in interest rates, and he said the impact on the homebuilding and homebuying industries is likely to be minimal for quite some time.
“Over the last 30 years, I haven’t seen the industry really go into a shutdown mode until you see rates on the 30-year start going into the 7’s, because then a lot of people start going into an adjustable rate mortgage, which is less,” he said.
The apartment markets, he added, will continue to be robust. Home ownership in the U.S. has dropped from about 71% at the peak to 62%, and the Millennial generation much prefers renting in urban locations to buying in suburban ones.
The challenge, Art said, is to make the numbers work on high-priced urban land, so multifamily developers are focusing on smaller units and higher amenity packages. The Millennials are just fine with that, he said. They focus on having WiFi and other technologies, plus location and walking distance to work and play.
Art said Encore is actively looking at opportunities in Denver and Seattle, but he described Miami as going through another resurgence.
“Ten years from now, we’re going to see a Miami that surpasses what we did in the last 20 years,” he said.
“I do a lot of traveling around the world on business, I will tell you that if you’re in Asia, the Middle East or South America, Miami is on everybody’s horizon. Everybody loves South Florida, and a lot of people are trying to figure out how they can open up their businesses here.”
Click here to listen to the full interview with Art Falcone, keynote speaker for the IMN Real Estate Private Equity Forum on Land & Homebuilding (East).
