All Forum Posts by: Stefan Tsvetkov

Chicago/the state of Illinois have been among the weakest markets nationwide in price performance terms this market cycle. Chicago (Cook County) prices are just 2% above their 'fair valuation' in 2009 (not vs. their subsequent bottom, but 'fair valuation').

Incomes in Chicago have grown healthily, and the city is heavily undervalued right now vs historical price/income ratios (-27% undervalued).

Yes, price-income ratios are a standard approach. Though exact time-period calibration, proof of correlation is not. It is deviation vs a well-selected historical level that drives drops post peak. 

Further, price-income ratios vary with time as housing availability may drive those upward/downward. So an enhanced metric is further fit. It is a detailed technical study with strong numerically-proven value-add.

There is no 'product', rather knowledge sharing, in an area that carries some level of confusion.

@Phillip Dwyer I did a technical study on RE valuations, which is highly predictive at peak of cycle. It is based on deviation from historical price-income ratios (though indirectly reflects housing shortage, population/housing supply shifts as well)

The vast majority of markets are not currently overvalued. I am sharing certain results with the BP community, especially for areas (not necessarily cities), which are overvalued (such as Las Vegas currently). 

I have done a few Podcasts/lecture events on the topic as well. Can PM me if any questions.

Video recording of the above event is included at the below link:

US Real Estate Valuations and Outlook Post 2020 Recession, lecture by Stefan Tsvetkov

For anyone interested, a video of my presented lecture/study mentioned above is below:

US Real Estate Valuations and Outlook Post 2020 Recession, lecture by Stefan Tsvetkov

@Bill B. You are right that Las Vegas was overvalued 2 years ago, in fact I see nearly the same valuation as today. You are also right that prices continued to rally after. And they may continue for further years from now, if the current recession proves not to be 'peak of cycle'.

Momentum, i.e. the market continuing to rally even if overvalued, is not inconsistent with valuations. Valuations predictive power is at peak of cycle alone (showed 83% correlation at the state level vs. the actual subsequent price drops in 2007).

Besides strong income growth, DC housing shortage (population/housing ratios) increased by 8% since 2010-2019. The latter has driven valuation metrics to higher sustainable levels. It is an additional reason why DC is not super overvalued now, compared to where it was in 2007.

@Jordan Moorhead 'Total return'. Have done well with cash flow producing properties with upside potential myself in NJ. Though price performance has been more moderate. 

Overvalued at peak of cycle (think 10-15% drop say on a levered basis) may wipe out one's "forced appreciation"/inefficiency at time 0, even if the latter investment approach may generally be sound. 

@Bill B. A market being 'overvalued' via a relative metric (such as price-income ratios etc), has little to do with 'predicting the future'/being a psychic etc. It is a technical indicator available at present, that one can freely speak to without being bound to specific timing. 

Valuations only matter at peak of cycle, and yes prices typically continue to rally until then.

Here is the link to the event. Note it was moved to a forward date, still thinking about format. Possibly a panel discussion/networking format, and yes, online.

https://www.meetup.com/Finance...