CAP Rate Compression; Sign of increasing property values or?

A great post on Co-Star News May 5th by one of my favorite bloggers Mark Heschmeyer and titled Scarcity Premium Seen Driving Current CAP Rate Compression, brings up very interesting and relevant questions regarding current decreases in CAP Rates.

As we know increasing CAP Rates normally signify rising property values. Mark writes on all sides of the issue and makes some great points about pent up demand and the correlation between this phenomenon and the recent changes in CAP Rates.

There are also excellent comments from Co-Star members on their views. I believe this is a must read, whether you agree or not.

To read the full story:

I for one; believe we have not hit the bottom and that we will have many false starts take place. Look at the stock market today! We have been told that the market dropping over 900 points was something we were past. Pete Najarian on CNBC called the VIX rise yesterday as Europe and Asia are having issues. Today's drop has not been fully disected, but I do not believe that we are out of the woods yet. Fear is rampant and having good information and being conservative, in all markets, is still an important plan going forward.

I was asked to join the Cinco De Mayo celebration at NAHREP Orange County, CA last night (thanks NAHREP your organization rocks). Great party at the Embers. I met with many in the residential community as they are excited as their market seems to be moving again, but on close questioning, their market is mainly short sale and REO plays. Hopefully based on population growth and regional movement, developement of land will start growing again as some markets may experience shorts in residential inventory. For the moment, however I do not see an end to housing issues as mortgage defaults may continue to rise.

2010 & 2012 Housing Crash

0416_option_armNational DebtReality Trac had commented that 70% of current mortgage defaults are currently not listed in MLS, they are kept off the books because it would impact the economy which would cause catastrophe in the stock markets and our dollar. Up to 9 million homes may enter foreclosure over the 2009-2011 period, versus one million in a typical year. At roughly U.S. $50,000 per foreclosure according to a 2006 study by the Chicago Federal Reserve Bank, 9 million foreclosures represents $450 billion in losses according to the New York Times. The fact is - many people are under the belief that we are coming close to the end of the housing crash, but many sources say it has only just begun.

For the full story go to

JW Najarian



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