Real Estate Strategist Sees Likelihood of Market Pause

Michael Hudgins, managing director of Ell Capital Management, Inc., joined REIT.com for a video interview at REITWeek 2016: NAREIT’s Investor Forum at the Waldorf Astoria New York.

Hudgins recently wrote a paper examining whether the real estate market is headed to a pause or a bust.

“At this juncture, absolutely, it’s a pause,” Hudgins said. He explained that the likelihood of either a pause or a bust is influenced by factors including supply, the use of leverage, and pricing. Excesses in any of these categories can be an indication of potential trouble, he noted. Hudgins stressed that he sees no excesses at this time, making the pause scenario more likely.

“Our space still offers pretty attractive risk-adjusted returns moving forward,” Hudgins said.

Hudgins also noted that in the current environment of rising debt costs, cap rates are likely to move sideways to slightly down, “given the alternatives for investors generally.”