Author: RE Cycle Is Turning

Real estate remains a cyclical investment, and after five years of excellent performance the cycle is beginning to turn, a real estate writer is cautioning.Steve Bergsman, author of "Maverick Real Estate Investing: the Art of Buying and Selling Real Estate Like Trump, Zell, Simon and the World's Greatest Landowners," says an investment in real estate investment trusts gained an average of 14.5% over the past five years, compared with a 9% decline by the S&P 500. Investments in individual properties have also done well. With so much capital flowing into real estate, property prices continued to appreciate. "While this has been happening over the past few years, investments were still worthwhile because the cost of money was so cheap," Mr. Bergsman says. "With interest rates rising and costs of capital increasing, many deals will no longer make sense." In addition, real estate has benefited from "transient" money that moved out of stocks and bonds in pursuit of a better alternative. "When the transient money leaves, real estate prices will decline dramatically," he says.