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Trounce. Crush. Clobber. Thrash. No thesaurus entry quite describes the extent to which Alpine U.S. Real Estate Equity fund has beaten the market averages in recent times. Over the past five years to June 1, the no-load fund returned an annualized 34%. That's an amazing 36 percentage points per year better than the results of Standard & Poor's 500-stock index, and it made Alpine the best-performing stock fund of any sort over that period. It is also the number-one real estate fund over the past ten years.
The brains behind this achievement: a 48-year-old former architecture student who turned to real estate. His name is Sam Lieber, and he's the son of Stephen Lieber, who founded the Evergreen funds. Sam Lieber is reaping the benefits of a decision made in 2001 to place a bold bet on the stocks of homebuilders. That sets Alpine apart from most other property funds, which tend to focus on stodgy, high-yielding real estate investment trusts. It's also made Alpine considerably riskier than most real estate funds.
At a recent visit to Alpine's office in Purchase, N.Y., we asked Lieber about concerns that housing has become dangerously overpriced. Read on for his response and his other thoughts about real estate investing.
KIPLINGER'S: Are we in the middle of a housing bubble?
LIEBER: Yes and no. There is no bubble on a national basis, but some markets are certainly overheated and there are speculative elements in those markets. Certain markets in Florida, markets in the Washington, D.C.-New York City corridor, Southern California, Arizona and Las Vegas have been very strong.
Have some of these markets entered the irrational-exuberance phase? Not necessarily. The fundamental issue is the lack of much new supply. That explains why this isn't a bubble. The number of existing homes available for sale on a monthly basis, which accounts for 81% of the total home market, has actually decreased by 2% over the past 15 years. That's astonishing, considering the growth in population and in the number of households.
You're talking about existing homes, though. What about new homes? There are 19% more new homes being built than 15 years ago. But compare the supply with demand, which is up by 99% in terms of the number of homes actually sold.
What's driving demand? A number of things, including the low cost of financing, the fact that many people have escaped the stock market in search of what they perceive as safe investments, immigration, population growth and so on. Supply simply has not kept up with demand, so prices have to go up. It's economics 101.
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