Digging for Value in the Real Estate Rubble by Zeke Ashton
It has been a long time since we’ve had extreme fear in the U.S. equity markets, an observation supported by the historically low volatility in recent years and the low prices one could pay for disaster protection in various forms (U.S. equity index puts, credit default swap spreads, etc) prior to this summer’s credit crunch driven sell-off.
Clearly, we’ve got fear now, and at the epicenter of that fear is the U.S. real estate market. This fear is reflected in extraordinary volatility and stock price declines for those companies seen most vulnerable to the real estate bust – most notably homebuilders, mortgage lenders, and mortgage guarantors – coupled with all-time high prices for disaster protection on these names.