Foros de la Plataforma por una Vivienda Digna

[netodyssey]

Some real-estate funds have promise

By WARREN BOROSON


The keynote speaker at last week's meeting of the New York Society of Certified Financial Planners said something that made the audience gasp.

Martin Cohen, co-chairman and co-CEO of Cohen & Steers, a firm famous for investing in real-estate investment trusts, said it's a good time to buy a single-family house. But he emphasized you must do your homework.

His argument: House prices have dropped. There are a lot of unsold houses out there, so you have plenty of choices. Mortgage rates are still low, at 6 percent. The economy is strong.

"It's the year to buy a home," Cohen said. "There are rarely good buying opportunities, but this might be one."

Other speakers had a different view.

"We're seeing price declines of 15 to 20 percent from the peak," said Christopher Low of FTN Financial. "And it will escalate. Buyers who know that prices might be down 15 or 20 percent a year from now will wait."

While real estate is local, Low said, there are local bubbles, such as in Phoenix, California, Las Vegas, Boston and parts of New York. In Florida, he said, there has been a 300 percent increase in the number of houses for sale.

"A lot of people who bought investment properties are trying to get rid of them," he added.

Low said there has been a 66 percent rise in California foreclosures over last year thanks to mortgages with low but brief "teaser" rates. And there's no relief for these struggling homeowners: A lender told him, "It's not our place to be paternalistic."

In areas where there is economic growth independent of the housing market, the housing market is safer. But in resort areas, the picture is "fairly ugly."

Cabbie investing, too

Low said he called for a cab recently, and the driver apologized for being late. He explained he had been on the phone with his real-estate broker. "Are you selling your house?" Low asked. No, the driver said. He was trying to get rid of his five houses in Phoenix.

More optimistic was John Herrmann of Cantor Fitzgerald, who insisted homeowners are stubborn. He visited Sanibel, Fla., before a threatened hurricane, dropped in on a brokerage firm and asked for a discount.

Brokers told him, "Forget it." After the hurricane had cut Sanibel in half, he returned to the brokers and asked for a discount. Still nothing doing. Interjected Low, "You might try your luck now."

Said Herrmann, "They're more worried about alligators than house prices."

My view: No doubt, you can find bargains in real estate now, especially in places that never were feverishly hot and if you are careful. But recall the recent advice of James Hughes, dean of the Bloustein School of Planning and Public Policy at Rutgers University: Don't buy a house now unless you plan to live there for a good many years.

Much of the conference was devoted to the question: What's good to buy now?

Japanese stocks were one choice. I have heard from a variety of reliable sources Japan is very much on the mend and all the easy money still hasn't been made. According to my sources, Fidelity Investment's foreign mutual funds have moved dramatically into Japan.

Michael Darda of MKM Partners said that property values are rising in Japan, and that quite a lot of appreciation is still possible.

Among funds targeting Japan, Morningstar recommends Matthews Japan (800-789-2742), Fidelity Japanese Small Company (800-343-3548), Fidelity Japan, T. Rowe Price Japan (800) 638-5660 and iShares MSCI Japan Index.

While the Japanese market may seem like a slam dunk, it is much safer to buy a diversified fund that happens to be heavily into Japanese stocks. Marsico International Opportunity (888-860-8686) was recently 27 percent in Japan. T. Rowe Price International was 28 percent.

A possible compromise: Vanguard Pacific Stock Index (800-997-2798), recently 74 percent in Japan.

Also recommended — by both Herrmann and Darda — were emerging markets. "Outstanding," said Herrmann. "Long-term, that's where you want to be."

Warren Boroson is a part-time resident of Ulster County. He can be reached at Wboroson@morristo.gannett.com.

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