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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Micah Lance who wrote (57789)

8/17/2016 4:58:34 PM

From: Graham Osborn

Respond to of 78705

Here's an interesting article on Dallas property market:

marketwatch.com

There are 25,000 single-family homes being built in Dallas county and there are 35,000 apartments being built. Apartment builders are buying up every piece of available land and no one can compete. The interesting part is that these apartments and condominiums are owned by trusts and investors who have no intent to convert or sell off. They are seeing that Dallas is quickly becoming a mecca for business and the population is relativity low for the amount of job creation and equity being built.

Dallas county is about 900 mi^2, so that's about 60-70 active developments per square mile.

I'm not sure what to make of this. To me it's exactly the same deal as with the stock market - people willing to pay up for cash flows they believe will be more valuable in the future and/ or take advantage of historically low mortgage rates. Is this fallacious reasoning? I don't know, but it seeks to invent a worldview inconsistent with the experience of the past 100 years or so.

In terms of TBNC, I don't think this should be a reason not to buy the bank. The bank itself is undervalued and a good chunk of their book is dental practices. I feel like they may get hurt when things cool off, but they should be able to control the downside somewhat in terms of their individual loan exposure.

As of December 31,
(In thousands, except percentages)	2015				2014
Commercial and industrial	$	71,562	50.8	%	$	72,711	57.0	%
Consumer installment		2,049	1.5	%		1,578	1.2	%
Real estate – residential		6,851	4.9	%		1,993	1.6	%
Real estate – commercial		16,736	11.9	%		21,084	16.5	%
Real estate – construction and land		10,322	7.3	%		5,477	4.3	%
SBA 7(a) unguaranteed portion		22,596	16.0	%		15,755	12.4	%
SBA 504		6,349	4.5	%		5,839	4.6	%
USDA		2,787	2.0	%		2,054	1.6	%
Other		1,542	1.1	%		1,000	0.8	%
Total Loans	$	140,794	100.0	%	$	127,491	100.0	%