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Tag: reit

RSO, Resource Capital Corp, Making it Happen

Resource Capital Corp, RSO, has reached highs going over 100% of its value in just one week.  The company runs a steady and conservative portfolio of commercial real estate loans that were most likely made during the late 1990s and early 2000s.  Only one single condo loan deal has been a default.  The others have been doing quite well.  It was at an all-time low on March 3, 2008 at $1.43.  Right now, it is at $3.87.  The company has a well established management team including  Jonathan Cohen and Leon Cooperman who have many years of real estate experience.

The recent $1 trillion dollar bailout was a huge stimulus to their stock price this week.  It started on monday moving from less than $2 to almost doubling which I would like to see by the end of this week.  President Obama’s $1 trillion bailout will secure all the mortgage securities making sure that these loans are paid off and the money keeps rolling in.  The dividend yield was set to be $0.30 per share for the upcoming quarter.  If you multiply that by 4, you get a yearly dividend of $1.20 almost 1/3 of the share value.  As a long-term stock, this will reap you many years of rewards.  Put it in your Roth IRA and just collect easy money.

United States Real Estate Prices Expected to Go Lower

Looking at the prices of real estate in the 2005-2006 levels, we had homes in California going over $500k-600k that have now dropped 30-40% from these levels.  The median price of a home in March 2007 as reported by C.A.R. was an astounding $582,930 for a single-family detached home.  In March 2008, this dropped 29% to $413,980.  The projected for 2009 will be at $358,000.  With federal interest rates at all-time lows 0-.25% and the trend continuing from December 2008, we can expect things to finally stop declining.  This does mean there will be huge changes but it does mean growth will finally begin and you can expect prices to start steadying out.

The line between interest rates and california housing prices is not a direct connection especially with the inflated house prices.  The prices we saw from 2005-2006 in California will not be those levels for quite a long time.  Also, remember prices move inversely with interest rates.  Nationally, when the interest rates start rising again which will probably be a while with the economy these days, the prices of the houses will have to decrease to retain affordability.  Before that even occurs, the housing price levels still need to fall furthur.

There’s no stock tips in this article, but some strong information concerning the real estate situation.  The California real estate is not representative of the whole national situation but it does help reflect many of the problems we are seeing nationally and I hope it helps clarify what to expect in the future.  Check out this link to see a bit more of where this housing trend will continue and what we should be doing right now.

It was a case of the Mundays…

Yesterday, I have to report on a commercial REIT that I have been looking for sometime.  When I first heard of the mortgage crisis, I thought it only affected the residential market.  People took out too big of a loan, and they had to foreclose or go bankrupt on their houses.  The others were investors trying to make a quick buck took out 5-year ARM loans instead of the normal 30-year fixed rate, and when real estate prices started dropping, their investments turned stale.  It’s easier to foreclose or go bankrupt then pay off a half million dollars on a worthless house.

Well, let’s hope the residential bottom out at the beginning of the year and it will finally stop bringing down commercial real estate with it.  RSO, a commercial REIT, is close to hitting a new low, but I think it’s due to move up for now.  It’s around $6.50 with a dividend yield of 20%.  The stock has had minimal exposure to the mortgage crisis, but it has been taken hold with the other REIT stocks because the sector that it is in.  I highly doubt they will go bankrupt.  If you look at their financials, you will notice that mose of it’s real estate is pretty stable.  I doubt the 6.48% drop has anything to do specifically with this stock, but the sector.  I’d suggest a buy if you are a long-term holder.  You get a nice fat dividend as you wait for it to move back up.