A California Boom that Won't Bust
| | Wednesday, April 20, 2005 @ 03:50 PM EDT
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Contributed by: Ken Lyons
Ken Lyons Properties
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California real estate panel says the market is still hot, downplays concerns about a bust.
BEVERLY HILLS, Calif. (Reuters) - Major home and commercial builders painted a picture of a domestic real estate market awash in cash Tuesday, and they downplayed concerns about a bust in the superheated housing market.
Speaking at the annual Milken Institute Global Conference, executives of KB Home (Research), M.D.C. Holdings Inc (Research) and
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Starwood Hotels & Resorts Worldwide Inc (Research) and Equity Group Investments discussed the real estate market as one of the greatest property booms ever.
Executives said the real estate market remained awash in liquidity, with easy financing available and a weak dollar to deliver foreign investors.
They also said despite the run-up in prices, gains have not been uniform and prices in major U.S. cities remained affordable compared to Europe and Asia.
The executives agreed that there has never been a better time to be a seller in U.S. real estate.
"We're in a market with real depth and real legs on it," said M.D.C. Chief Executive Larry Mizel.
"The big boom of the last 10 years was not seen all through the United States," KB Home Chief Executive Bruce Karatz said. "There's a supply-and-demand balance that I think will stay good for many years."
"The housing bubble has been created more by the business press than reality," said Sam Zell, chairman of Equity Office Properties Trust and Equity Group Investments LLC. "You can't have a crash without oversupply."
The executives pointed to immigration as one of the biggest driver of home sales, and they also expected the growing senior market to add sales and innovations in housing products.
"The majority (of seniors) don't want to live on a golf course in Surprise, Arizona," Karatz said. "They want to live close to where they were living and close to their families. This is difficult and we are trying to see if we can ramp up this type of development."
Starwood Executive Chairman Barry Sternlicht said his company also has begun acquiring single-family and senior housing "because we think the cycle will last longer than most people think."
"This is a great time to own and buy hotels," Sternlicht added. "We are buying at well below replacement costs ... same store sales are up, the business traveler is back."
Executives dismissed the idea that weakness in job creation could take the wind out of home prices, which rose 8 percent in 2004.
Zell and the other panelists expected labor and materials shortages to continue into next year, driving new construction out of reach for some builders and buyers.
"You can sell anything you can get your hands on in Las Vegas, but nobody knows what it costs to build there because (contractors) are stretched so thin," Sternlicht said.
Housing shortages and buyer demand have driven a huge number of conversions of apartments to condominiums, Sternlicht said. "It's wacko out there but it's fun, as long as you can get a chair when the music stops," he said.
The executives pegged the southwestern U.S. and Florida as best real estate buys, while Zell said he'd put his money in New York City as the best property investment in the coming 24 months.
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