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Housing: Anecdotal Evidence of a Bottom

January 22, 2012
“Housing has officially bottomed!” So said Jim Cramer in June 2009.

It’s not really fair to pick on Cramer. Anyone who talks a lot in public probably regrets much of what they say, especially when they make a lot of predictions. I feel for Cramer. If you follow him on Twitter you’ll occasionally get a day of him defending himself from attacks. A lot of the attacks on him are personal, which is unfortunate. Thin skinned? Maybe so, but still. Watch him for entertainment, not stock ideas.





I got a five page letter in the mail a few days ago from my condo association. I bought a place in 2003 in Alexandria, VA. I lived in it for a few years, rented it out for a few years, lived in it for another few years, and have rented it out again since 2009. Apparently the Board has decided to explore selling the entire complex to be converted into apartments. There are 225 units. They need 80% approval from the owners to consummate the sale.

The document was extremely one-sided, especially considering it was written by the brokerage firm that would get a cut of an eventual sale. About 5% of a $350 million transaction probably means they’re a little biased.

At the same time, it is true that rental prices have gone up so much relative to individual condo values that it would be worthwhile for the complex to be converted. There is a comparable condo to mine currently for sale for $120,000. Another sold in October for $144,000. If the conversion goes through, I’d probably get around $170,000. It’s pretty clear that a conversion into apartments would be in most owners’ interests.

Does this mean we’re at a bottom? My guess is yes, considering rampant conversions from apartments into condos marked the top. There is plenty of empirical data in addition to anecdotes. I don’t think it's 2009, and I don't think I'm Cramer.

Read more at Intellectual Honesty.

About the author:

Steven Kiel
Steven Kiel is the president and chief investment officer for Arquitos Capital Management, a Virginia-based investment management firm. He is a graduate of George Mason School of Law and a captain in the Army Reserves. He manages two spoke funds, The Freedom Fund, a value-oriented portfolio, and The Hayek Fund, a portfolio dedicated to free market principles. He can be contacted at steven.kiel@arquitos.com or through the firm's website at www.arquitos.com.

Visit Steven Kiel's Website


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