If China were to have a real estate bust, what would it look like?
The consensus is that China has a real estate bubble. The only argument is whether it will burst in some crash that will take down China’s economy or come in for a relatively soft landing that slows China’s economic growth but in no measure extinguishes it.
It’s tough for me to come down on one side of that debate or the other because most of the time the protagonists don’t bother to set out what the bursting of a real estate bubble would look like in China. There’s a kind of unspoken vague agreement that a Chinese bust wouldn’t look like a U.S.-style bust, but no real effort to put real flesh on the bones of a China-style bust.
And without fleshing out what a real estate bust in China would be like, it’s just about impossible to decide the seriousness of that bust or the extent of its consequences.
Let me take a run at that and see if the effort helps settle the crash vs. soft landing debate. Or at least moves it along a bit.
I don’t think there’s any real argument about this: China is in the midst of a speculative rise in real estate prices that can’t be sustained.
Sell Rayonier (RYN)
I’ve already sold Rayonier (RYN) out of the Jubak Dividend Income Portfolio today, May 28. And now I’m selling it out of Jubak Picks as well. Nothing wrong with the stock—when the real estate market does finally turn, this timber and real estate REIT will do quite well. But I think that turn is still a long way away and that investors will see better places to put their money to work—most likely in the world’s emerging stock markets—before then.
I’m looking at a 2% drop in the price of a Rayonier share since I added it to the portfolio on November 9, 2007. On a total return basis—that’s capital gain (or in this case loss) plus dividend payments—I’ve got an 8.4% profit.
China fiddles while real estate market gets ever hotter
I love a good dither. Especially when it’s cloaked in language that makes it sound like decisive action
This morning’s headline in the Financial Times reads “Beijing acts over housing bubble.” Sounds like China did something significant to control an inflating asset bubble that saw housing prices climb at an 11.7% rate in the last year. For context that’s the fastest rate of increase in housing prices since the Chinese government began keeping this data in 2005.
Buy Deltic Timber (DEL)
Deltic Timber (DEL) owns 439,000 acres of timber land in Arkansas and Louisiana. Most of that the company uses to produce timber and pulp wood, but the company is turning an increasing piece—well at least increasing until 2007 put the kibosh on the real estate market—into commercial and residential projects including its flagship Chenal Valley, a 4,800 acre community built around two Robert Trent Jones golf courses.
This year probably marked a bottom for Deltic’s real estate operations.
Is this the end of the housing recovery? Even talking about an end to government subsidies sends the market into a tizzy
The program that gives first time home buyers an $8,000 tax credit is due to expire at the end of November.
The Federal Reserve will talk about winding down its buying of mortgage-backed securities in its two-day meeting this week.
Will that be the end to the rally that saw new-home sales rise 9.6% in July from June? That’s the biggest sequential month to month jump since 2005. And that saw stocks of home builders such as D.R. Horton (DHI) and Lennar (LEN) soar 40% and 66%, respectively, from July 1 to September 21?
