Chart of the Day: Treasury vs. Real Estate

Today’s Chart of the Day comes from Re:venture Consulting and shows the history of the 10-year treasury rate (in yellow) vs. the CAP, Capital Asset Pricing, rate (in blue). The CAP rate is the percentage return that real estate investors receive after all expenses, divided by the cost of those investments. Normally, as long as anyone can remember, due to the risks and work involved with real estate, investors demanded a higher return than treasuries. Recently, this has not been the case, which means something has to change. Either treasury rates will have to fall or returns on real estate will have to increase. For real estate, rents will have to go up or real estate prices will have to fall. Time will tell.