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Real Estate Rally: Too Far Too Fast?

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CNBC.com

Has the rally gotten ahead of itself in the real estate sector?

With the S&P Real Estate Index advancing 35% in the last three months, some have questioned the legitimacy of this rally. Today, we zero in on residential real estate.

Sam Lieber, Portfolio Manager of the Alpine Mutual Funds and Len Blum, Managing Partner at Westwood Capital - weighed in on whether the fundamentals of the housing market support the huge run in stock prices that we've seen.

Lieber believes that the housing market still has some headwinds, with the big question marks on foreclosures and jobs creation. Lieber said "the market is bouncing along."

Blum said that while he doesn’t think the picture is positive, he "doesn't think it's as negative as it was a month ago or the month before that." Blum also said that "the commercial market hasn't seen the shoe drop and it will. I think it has a little further to go." He also listed four factors that he'll need to see before calling a bottom in this market:

  1. Getting rid of the foreclosure overhang
  2. Being realistic about banks showing liquidity for their portfolios
  3. Needing more mortgage availability
  4. More confidence from the consumer that he/she is going to be able to make a payment

Meanwhile, Lieber said we "might have to see lower interest rates" before getting to a more stable situation. Blum added that it was hard to gauge where rates were going to be, given his belief that "we're basically in a deflationary environment." He also doesn't see enough economic activity to push up interest rates.

Join us this afternoon as we focus on corporate bonds. This is one sector that has seen a spectacular rally, but could the decline in stocks reverse that trend?

We'll get some answers from Mohamed El-Erian, CEO and Co-CIO of PIMCO at 3pm ET. And on Wednesday, we'll get perspective on Commercial REITs with Nick Schorsch, Chairman & CEO of American Realty Capital and Alex Goldfarb, Associate Director at Sandler O'Neill.

Liza Tan contributed to this article.

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