Jonathan Yates: Bill Gross recently confirmed a bleak outlook for real estate as he predicted that low interest rates would be maintained by the Federal Reserve for “three, four or five years.” He also stated that the European Central Bank and the Bank of England will continue to keep interest rates low, too.
This is obviously being done in further attempts to revitalize the real estate market. Neither the housing sector nor commercial real estate has recovered from the 2008 credit market crash.
There are still 4 million foreclosures waiting to hit the market in the United States. As bad as things seemed, it turns out the National Association of Realtors has been too optimistic in its figures. As a result, new numbers will be issued on December 21.
It is not just the United States. Gafisa SA (NYSE:GFA) a Brazilian homebuilder, is off about 60% for the year. Xinyuan Real Estate Co (NYSE:XIN) a Chinese homebuilder, is down almost 30% year to date.
Back here in the United States, the ETF for home builders, SPDR S&P Homebuilders (NYSEARCA:XHB) is down for 2011, too.
If Jim Rogers is right and a new financial crisis hits that is worse than 2008, the real estate sector will suffer even more, no matter how low interest rates stay.