Real estate pricing: Short-term view needs long-term perspective

“Where will cap rates eventually settle after they peak?” It’s one of the most-asked questions by real estate investors.

It’s hard to answer though because cap rates don’t settle. They’re dynamic, transitioning from one period to the next. That’s why any short-term outlook for cap rates needs the context of long-term expectations.

Get a detailed answer to the cap rate question and the process for arriving at it in “Look past your nose: Why your short-term view of real estate pricing needs long-term perspective.” It covers:

• Why a long-run view is needed: Why we believe the dynamic nature of real estate cap rates calls for a long-run intrinsic value¹ approach to understanding cap rates.
• Developing a long-term range: Step-by step assumptions to build a range of future long-term average real estate cap rates.
• Comparing our long-term view to current cap rates: Using the long-term average range and current market average cap rates per sector as proxies for comparing potential exit cap rates to potential acquisition cap rates.

Read the complete paper.