Editor’s note: Pat McAlister owns and operates a real estate consultant firm based in Nashville, Tennessee. Pat has worked in housing and real estate for over 15 years both as a builder and an analyst/ consultant. His insights are always unusual and off the beaten path. Today he shares with us why housing isn’t likely to pick up for several years as well as which sectors in real estate will benefit from the continued housing crisis. Where do we go from here? By all indications the housing market is a mess. Credit sources have dried up. Builders and developers are going out of business at a quickening pace. So where do we go from here? Everybody lives somewhere. It may be only a temporary dwelling, but you HAVE to live somewhere. According to the US Census Bureau there are currently 129 million housing ...

In 12 days, I will be stepping off a Hainan Airlines flight at the new Beijing International Airport and setting out to investigate some investment ideas. I'm particularly excited about two real estate companies. More on them in a moment. Typically, Asian companies are eager to share their exciting growth stories with American investors. So booking meetings with company executives, factory tours, R&D centers, and other behind-the-scenes expeditions is usually very, very easy. However, this time I received a completely unexpected reception from the Investor Relations departments of the Beijing companies I wanted to visit. Here are a couple (paraphrased) examples of what they said: "Mr. Sagami, we are honored to have you visit our company, but are you aware the Olympics will be held during that week?" "August? Do you mean ...

Beazer Homes USA Inc. (BZH)I was watching the housing stocks back in August and September of 2007 when they were falling to new lows everyday but switched out of the industry in favor of banks, autos and financials. But after seeing an old name reaching a new low after-hours, I started to re-examine the old names. Still Going Lower I shouldn’t have been surprised but all the housing names that I had been short but got out of during short squeezes are pretty much all much lower now. Stocks like DR Horton (DHI), Lennar (LEN), Centex (CTX) and Beazer Homes all reached new 52 week lows today. Beazer Homes Worthless One of my favorites over 9 months ago was Beazer Homes and this stock has fallen so far that there is barely any market capital left. And the analysts that cover the company are ...

Good article on CNN Money today about the Real Estate market, check it out: Let the bargain hunting begin. Prices may still be falling, but they're low enough for some investors to buy, sell, and pocket a tidy profit. NEW YORK (CNNMoney.com) -- Rock-bottom home prices have finally begun to lure vulture real estate investors into the fray. Sharon Restrepo, a broker in South Florida, where home prices have dropped nearly 27% over the past 12 months, recently bought a three-family home in Cape Coral from a very motivated seller for a mere $65,000. It listed for $195,000. She can rent ...

Avid readers will know that I rather like General Electric at these prices.

Here I point out just how good the weak USD is to them.

And here I point out just how fantastic GE’s asset sales have been. [Just imagine if GE still owned FGIC and Genworth. The former is in deep trouble. The latter is merely problematic.]

Regular readers will also know that I subscribe to the GE press-release blog which you will find here.

But when I am long a stock I always look at what is wrong with the story. Indeed the central investment trap I fall into is to ignore the positives in my shorts and ignore the negatives in my long. This post is a conscious effort to correct that.

The negatives

With GE I point to a few negatives:

The ...

Macro Shares filed for two ETFs that allow for gaming real estate prices as measured by the S&P Case-Shiller Composite 10 Home Price Index.

The 10 in the name refers to the ten cities in the index which are Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington D.C.

One fund will go double long the index with ticker UMM and the other will go double short the index with ticker DMM.

You can read more about these from IndexUniverse and 24/7 Wallstreet.

We all know that real estate prices have been going down. One report a couple of weeks ago, via Bloomberg, had the Case-Shiller 20 Index (so a bigger sampling) declining by 14.4% versus the previous year.

For now there seems to be no consensus of how long before the house decline bottoms …

The four big asset classes are stocks, bonds, cash and real estate. Direct ownership of real estate is the pure form of the asset class. To achieve diversification within the financial capability of most investors, securitization of a direct real estate portfolio (REITs) is a second best solution.

REIT vs REAL ESTATE FUNDS:

The problem with publicly traded securitized real estate is that it takes on some of the characteristics of stocks, and loses some of the distinctions of the direct real estate asset class. Except in bubble times, the yield of REITs also tends to make them trade a bit like bonds. Overall, REITs are hybrid in nature, but still generally thought of as a separate asset class more than as a separate sector within the stocks asset class.

Because REITs are not as widely authorized internationally, and because of investor demand …

When Americans first celebrated Memorial Day, our nation was split in two — North and South.

Similarly, our planet today is divided in two separate worlds — East and West.

They’re not at war. But in the never-ending battle for economic wealth and hegemony, the chasm between them couldn’t be deeper: China and much of Asia, growing by leaps and bounds; the U.S., sinking into recession.

Coincidentally, one year ago, Tony Sagami and I debated this very topic.

We both are American and both love this country. …

It is ironic that US REITs year-to-date have outperformed US stocks, non-US developed market stocks, and emerging market stocks, as well as directly owned commercial and residential real estate. Only commodities have outperformed REITs so far this year.

VNQ, ICF, IYR and RWR are still down from 17% to 20% on a trailing 12-month basis, but they provide a 12-month distribution yield of from 3.90% to 4.75% which is more than the current 10-year T-Bond rate of about 3.70%.

How vulnerable REITs are to a reversal of fortune is unclear.  If the economy is as vulnerable to major recession as some say, the rental income of REITs may not prove as strong as expected, which would tend to lower the distribution yield.  Continued outperformance itself, would reduce the yield rate.  …

One of the ingredients for "bubbles" is the quest for the home run. Investors look to how much they wish to gain rather than to risk and reward. What happens when this quest intersects with a major downturn in an asset class? The Foreclosure Boom: Donald Trump Our local papers have featured ads from Donald Trump, explaining how you can profit from the foreclosure explosion. This article, while a few months old, is typical of what is happening. It is from Seattle, a pretty strong housing area which we visit four times a year for board meetings. But not to fear, capitalists, because one man's misery is another man's meat. In the same issue of the P-ITrump University"," a class where Trump promises "If you're not a millionaire by December 2008, you didn't attend my foreclosure workshop." Yes, that's right. Your struggling neighbors who are losing their homes in the subprime fiasco, are easy ...