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Working Papers

Is U.S. Real Estate Over-Priced?

Working paper #553
Jacques N. Gordon and William J. Maher

Commercial real estate prices are hitting record highs. Debt and equity capital is flowing to U.S. real estate at unprecedented levels. The authors point out that low interest rates are one of the key factors driving the market. Yet they do not foresee plummeting prices, even if interest rates rise to the 5 percent level, due to the depth and breadth of capital interest. Their advice is to focus on value-add real estate investing and to prepare properties for resale into an expanding “core” market. While real estate pricing has not yet reached “bubble” proportions, in their view, the authors concede that the market is awash in capital.

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