“Brilliant” call… not!

A few days ago an article written by Forbes’ Kenneth Rapozza said “forget the housing bubble story in Brazil, that real estate market still has legs” until 2017. Most of the calls were not his, but of real estate “experts” (read here the list of “experts” who wrongly denied the US housing bubble in 2006). And the author still seemed to agree with them:

“So what’s with the 2017 deadline? Brazil’s building out for the 2104 FIFA World Cup. In 2016, the Summer Olympics come to Rio de Janeiro. The fundamentals of Brazil real estate … have probably never been so good.”

Well, everyone has opinions, and we do respect and often read Mr. Rapozza’s insightful articles… but this one in special has caught our attention. Could he possibly be right? Absolutely. Is it likely? Not in our opinion. 

Where do we start??? First, a couple of paragraphs from the article:

The recent five year real estate boom (in Brazil) has a good five more years before home values stop appreciating. (our comment: wow, if he is right – not likely – this will be the “call of the century” considering that real estate prices in Brazil already doubled or tripled since 2007! is there any room for another 2x or 3x in the next 5 years? That would be a historical record by any measure)

“The best way to participate in the real estate boom as an investor at this point to invest in real estate funds in Brazil,” said Consul Patrimonial. That kind of comment is smooth bossa jazz to the ears of fund managers like Joel Wells, who runs the $356 million Alpine International Real Estate Fund (EGLRX). The fund holds a number of Brazilian home builders and commercial developers. Well’s fund is down 28% year to date.

Our comment: Alpine’s EGLRX is down big time this year but still seems positive on the Brazilian real estate market (bubble? what bubble?). Mr. Samuel Lieber is the lead manager of EGLRX and Joel Wells’s boss. Do you guys want to know what Mr. Lieber (named by Forbes as “The Mortgage Maven“) said back in 2005 and 2006 about the US housing bubble?

Stop worrying about bursting bubbles and get a piece of the housing boom. Buy shares of mortgage companies.” And then repeated his bullish call to Barron’s by mid-2006:
“We don’t see a bubble. Historically, home prices just don’t go down nationwide unless we are in a significant recession. The last time home prices fell nationwide was in 1990. It’s employment that really counts. The underlying fundamentals of real estate are still very positive.” (by the way, he is part of our list of “experts” who were wrong about the US housing bubble) 

Having said that, back to Forbes’ article…

“There’s a psychological margin that Brazil real estate enjoys at the moment due to the oil discoveries off the coast of Rio, the World Cup and the Olympics, which makes Brazil very attractive to foreign investors at the moment. But after 2017 Brazil will still have its oil discoveries, but the World Cup and Olympics will be done with and foreign investment into Brazil will slow as a result,” Oliveira from Consul Patrimonial said, adding that the middle and lower classes would have spent more than 10 years acquiring properties and supply could outweigh demand by 2017.

Final comment: Great… remember these names. They are calling the popping of the Brazil housing “bubble” in 2017.

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