Real estate behemoth Re/Max (RMAX) is off to the races, as the freshly launched Re/Max IPO is already up about 22% today after pricing its deal at $22 — above its initial $19-to-$21 range.
Understandably, Re/Max chairman and co-founder Dave Liniger was definitely upbeat when he talked to InvestorPlace about the company’s prospects as well as the macro trends in the real estate industry.
“Since starting Re/Max back in 1973, we’ve gone through five recessions,” he said. “The latest one was the toughest because of the subprime mess and the bubble. But since then, we’ve seen a nice rebound.”
Not all has been sunshine and rainbows of late. There have been recent headwinds, such as higher interest rates and continued sluggishness in the economy that have put pressure on homebuilders such as KB Home (KBH), Lennar (LEN) and PulteGroup (PHM).
However, Liniger thinks these factors are temporary, and things Re/Max and real estate in general will be buoyed as longer-term trends play out. For instance, pent-up demand.
“Because of the recession, many who are 19 to 29 have returned to live with their parents,” he said. “They did not get college-level jobs, incurred large school loans and so on. But this group does not want to live with their parents forever. So over time, we’ll see them buy homes.”
And even if many of these get apartments, this will still help the housing market.
“The demand will increase rents and this will make homes even more affordable by comparison,” Liniger said.
Liniger also thinks real estate will be helped by those people who suffered foreclosures during the crisis, but no longer want to be renters. “They want a home and a yard and not to answer to a landlord,” he said.
Even immigration should come into play.
“Legal immigration is about 1 million per year, and this group buys homes fairly quickly,” Liniger said. “But there is also illegal immigration. Regardless of your politics, we will not send back 11 million people. Rather, when there is reform and a path to citizenship, they will be another driver for demand for homes.”
Just one of these factors would allow for nice growth of real estate markets, but all of them in concert could be a forceful driver.
So while there inevitably will be setbacks along the way, the long-term does look bright for residential real estate. And as seen with the success of the Re/Max IPO today, it looks like Wall Street agrees.
“Our deal was oversubscribed by 17X,” Liniger said. “This is the kind of thing you see with a hot tech IPO.”
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.