roger staiger, frics georgetown university 14 july 2015 [email protected] prepared:...
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Roger Staiger, FRICSGeorgetown University
14 July [email protected]
Prepared: Michael Cardman, EIT
NVBIA Real EstateOutlook Conference
Capital MarketsReal Estate
Disclaimer
All slides in this presentation are the intellectual property of Stage Capital, LLC and Roger Staiger, FRICS. Use of these slides is only permitted when presented by Roger Staiger, FRICS or a designee of Stage Capital, LLC. Further distribution is strictly prohibited.
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Shameless Self Promotion Literally wrote the
book on Financial Modelling
Available now on Amazon.com ($171.00)
Publisher: Routledge
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U.S. Budget(Receipt v Outlay)
Roger Staiger, FRICS [email protected]
Table 1.1—Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789–2019 | Federal Budget | Jan 2015 | www.whitehouse.gov
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2014: $650.0bn Deficit2018: $415.0bn Deficit
U.S Gross Federal Debt
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6.4%/yr increase
Table 7.1—FEDERAL DEBT AT THE END OF YEAR: 1940–2019 | Federal Budget | Jan 2015 | www.whitehouse.gov
2014: $17,892,637,000,000= ±57k/American (315,000,000 Americans)= ±110K/Taxpayer (165,000,000 taxpayers)c
Risk-Return Spectrum
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-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
5% 10% 15% 20% 25% 30% 35%
Ret
urn
s (A
rith
met
ic A
vera
ge
)
Risk (Standard Deviation)
Risk-Return Spectrum (Nov 02' - Nov12')
Commodities All Commercial
Commodities
S&P 500
Office
All Commercial
Retail
Industrial
Residential REITs
Commodities
S&P 500
Office
Multifamily
Retail
Industrial
Residential
REITs
REITs S&P 500 Office
Multifamily
All Commercial
Residential
Industrial Retail
Multifamily
10-year
7-year
5-year
Source: Matthew Do, JHU Practicum
US Asset Values – 2006 2006 Asset Class Valuation ($B)
22,600
6,000
18,100
27,400
0 5,000 10,000 15,000 20,000 25,000 30,000
Residential Real Estate
Commercial Real Estate
US Equities
US Fixed Income
$74,100B Total Market
$28,600B
Real Estate
- CME Group
4% 28,600
63% 29,434
(12%)
19,837
$84,500B Total Market
$26,475B
July 2015
July 2015
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11%6,638$
$$$$$
$17,892,637,000,000(What happened to it?)
315,000,000 Americans165,000,000 Tax-paying Americans
$110,000/Tax-paying American
Main Street vs. Wall StreetPolarity of Wealth
Shrinking Middle ClassWill your children be better off than you?
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Inflation
Can it save US?
Inflation(Why today is different)
US Treasuries owned abroadInflation will cause shorter duration investment,
i.e. increase borrowing costs for US45% of trading debt owned abroad
Federal Reserve Inflation TargetAt or near 2.00% (1.7% last year)
Japan’s Lost Decade!U.S. GDP composition
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Real Estate
The Good News (sort of!)
Lifetime Cost of bps
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Base +1 bp Delta +10 bp Delta +100 bp DeltaAverage 2014 Rate 4.17% 4.18% 4.27% 5.17%
Loan 500,000 500,000 500,000 500,000 Term (Year) 30 30 30 30
Payment (Mo) 2,437$ 2,440$ 3$ 2,466$ 29$ 2,737$ 300$ Payment (Annual) 29,245$ 29,280$ 35$ 29,595$ 351$ 32,845$ 3,600$
Payment (life) 877,344$ 878,393$ 1,049$ 887,864$ 10,520$ 985,344$ 108,000$ note: one (1) bp = one one-hundredth percent (0.01%)
CPM BP Example
U.S. New Housing Units by Year
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What is being built? Sustainable?
Source : 2
“U.S. Construction Spending Hits New Postrecession High”
–WSJ 1 July 2015
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Residential Year-over-Year(October 13’ – October 14’)
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Average: 5.0%
Source : 7
Residential Month-over-Month(September 14’ – October 14’)
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Source : 7
Comp-10/DC-MSA Yr-over-Yr(Jan00’ – Oct14’)
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Source : 7
The Next Crisis!
Education???
Student Loans$1,000bn industry Virtually no underwritingInability to discharge debts in bankruptcyLargest higher education provider in U.S.
University of PhoenixOwned by Apollo Hedge Fund
Tuition increases exceed 2X inflationKaplan, American Military University???!!!
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Total student loan balances by age group
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Taken directly from New York Fed | Household Debt and Credit: Student Debt | February 28, 2013
Non-mortgage balances
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Taken directly from New York Fed | Household Debt and Credit: Student Debt | February 28, 2013
Non-student debt declined for all borrowers age 25-30
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Taken directly from New York Fed | Household Debt and Credit: Student Debt | February 28, 2013
Wealth Management(ers)Certified Financial Planner (CFP)
“…a bachelor’s degree (or higher), or its equivalent, in any discipline…”“The bachelor’s degree requirement for CFP
certification became effective March 1, 2007”http://www.cfp.net/become/degree.asp
Surgeon = MD; Dentist = DDS; Accountant = 150 Hours of accounting; …Finance – ‘in any discipline…’!!!
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Prediction(s)
The Road Ahead
PredictionsDelayed interest rate increaseAnemic growthGlobal continued slowdownGas under $1.75/gallon (Still predicting)Tuition increaseShort-term continued build cycle
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