http://www.squarefeetblog.com/commercial-real-estate-blog/2009/09/29/deflation-fears-emerge/ Commercial Real Estate Blog Mon, 16 Aug 2010 10:18:50 +0000 hourly 1 http://wordpress.org/?v=3.0.1 http://www.squarefeetblog.com/commercial-real-estate-blog/2009/09/29/deflation-fears-emerge/comment-page-1/#comment-2766 Lancelot Lie Fri, 02 Oct 2009 11:49:33 +0000 http://www.squarefeetblog.com/?p=3085#comment-2766 I agree that deflation (or at least the lack of inflation) is the real concern. Inflation simply isn't evident in bond spreads and 30-year Treasuries are now under 4% and 40-year tax free bonds are at their lowest in 40 years. Real estate is traditionally considered a hedge against inflation by many investors. But I think the competition for multi-family assets you may be seeing is simply the perceived limited supply of housing that the Bay Area suggests. Agency financing has helped prop up values on larger assets for sure. And I tend to agree that some price levels I see for multis (in Chicago) don't seem to justify the yields I project in the supply-abundant, high-unemployment, consumer-constrained environment that lies ahead. I agree that deflation (or at least the lack of inflation) is the real concern. Inflation simply isn’t evident in bond spreads and 30-year Treasuries are now under 4% and 40-year tax free bonds are at their lowest in 40 years. Real estate is traditionally considered a hedge against inflation by many investors. But I think the competition for multi-family assets you may be seeing is simply the perceived limited supply of housing that the Bay Area suggests. Agency financing has helped prop up values on larger assets for sure. And I tend to agree that some price levels I see for multis (in Chicago) don’t seem to justify the yields I project in the supply-abundant, high-unemployment, consumer-constrained environment that lies ahead.

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