Originally posted by @Randy Bloch:
@Jason Bible
Recession don't only impact Wall Street, there is typically loss of jobs during a recession which impacts Main Street...people's ability to pay rent and housing demand. Now some recession are worse than others. The 2008 one was particularly bad for real estates because of the loose lending practices and pooling of sub prime mortgages. I would not expect the next recession to impact real estate as much, especially SFR and Multi residential. It might impact commercial and industrial more. Also, farmland is still at historically high prices. 10yr of historically low interest rates have caused cap rates to compress ...there is lots of capital chasing returns...retirees and pension funds need returns to live. Eventually interest rates will go higher and people will require higher cap rates for the associated risk they are taking on....when does this happen? That is the million dollar question....but it will happen at some point....and when the 30yr bond is paying 5-6% with no risk, investors will buy those rather than a REI with 6% cap rate and prices will adjust.
I dont disagree with a lot of what you said, however your last point is where I have a litany of heartache. I just dont see money, all of a sudden, becoming more expensive. The world is so much more different than it was 30 years ago. 30yr paying 6%? Most likely not in our life time.
Wealth is becoming more concentrated at higher levels. When one, a company, country, or individual, has REAL wealth they worry more about risk of capital than rate of return. Look at Breaburn capital, Apple. They can't buy enough high quality debt. The wealthier we become the more we look to preserve capital with risk-less assets.
