Goldman Sachs Bearish on CRE REITs
Zero Hedge has a post up on Goldman Sachs’ outlook for CRE REITs. Long story short – Goldman is not positive. Zero Hedge refers to REITs as “arguably the most overbought (by a metric mile) sector” in the stock market and cites a few key points from the Goldman forecast:
- Cautious coverage view: we expect relative underperformance versus the broader S&P 500 Index as CRE trends lag the economy by 12-18 months.
- Our total return forecast: flat to down 15% (which equates to a price-only decline of 20%-25%)
- Primary concerns: valuation still unfavorable, deteriorating growth trends, challenging funding market (over $75 mn still tough to do)
- CRE values declining: cap rates to increase 300-500 bp from the lows, or a price decline of 30%-40% from peak levels
This graph should help clear up why CRE sellers should get in front of the market before it is too late:
Zero Hedge has several other graphs from the Goldman forecast on their site.
