Real estate investment trusts will continue to attract institutional investors looking to invest in single-family housing, CEO and chairman David Lichtenstein of The Lightstone Group told HousingWire.
Firms such as Starwood Property Trust (STWD), Blackstone Group (BX) and Colony Capital (CLNY) invested in the real estate sector throughout the year, creating a solid floor under home prices.
“So the theory is that if housing has a floor under the pricing, the paper will trade better,” Licthenstein said. “The paper will be stronger and trade better.”
Lichthenstein’s privately held New York-based real esatate company owns and manages a diversified portfolio of industrial, office, retail, multifamily and hospitality properties located throughout the United States.
Various REITs this year — both real estate and mortgage REITS — filed for initial public offerings of their common stock including Aviv REIT, American Realty Capital Properties (ARCP), Silver Bay Realty Trust and Orchid Island Capital.
Lichtenstein attributes this trend to companies finishing a four-year period in the industry when capital was very constrained, resulting in a “pent-up demand” to go public.
“You’re looking at pent-up demand, just bubbling to the surface, together with the fact that REITs were well-priced this year,” he said.
With the looming fiscal cliff, Lichtenstein is confident the housing market will remain secure and can a withstand downturn more than any other sector in the economy.
“I don’t say muscular because there’s too much uncertainty in the economy, but the pure mathematical affordability of it is almost any damage the politicians could do to the economy, housing will still be sturdy,” he said.
Thus, the combination of low interest rates, historically low mortgage rates and low median cost of housing will be key drivers in the industry in 2013.
“When you take a person’s income, the average family shouldn’t spend more than two-and-a-half times of their income on housing and that’s really been achievable,” Licthenstein said.
As a result of high affordability, Lictenstein stated that owning a home has become cheaper than renting a home, especially for people in Gen Y that have felt frozen out of the housing market over the past decade.
Currently, homeowners can purchase a 30-year mortgage for under 4% and purchase a median home at an affordable price.
“In 10 years they are going to say these were the olden times when homes were affordable,” he said.
Lightstone debuted its nontraded Lightstone Value Plus REIT in 2006 for $300 million. The REIT invests in a mix of office, retail and other commercial properties.
cmlynski@housingwire.com
