REITs Struggle, But REIT ETFs May Be Just Fine

Real estate investment trusts (REITs) could be facing a mountain of trouble. But if the sector’s shares and related exchange traded funds (ETFs) play their cards right, they could emerge from the mess unscathed.

REITs own a range of real estate, including office buildings, strip malls and apartment buildings. The sector has a heavy debt load, but if REITs can roll it over, the shares may not suffer. REITs already have rallied about 90% from the 18-year low they hit in March as the drop-off in home prices and economic conditions has slowed, reports Donna Kardos Yesalavich for The Wall Street Journal.

The sector at large saw a huge drop last fall, however, the stocks are anticipated to go nowhere but up if debt refinancings take place. As banks recover more, this is becoming increasingly likely.

Portfolios and managers alike are positive toward REIT shares and ETFs, as they are likely to avoid bankruptcy, and from a technical view, REITs look set to rise as much as 35% from current levels. There are market corrections and pullbacks to be wary of along the way.

• First Trust S&P REIT Index Fund (FRI): up 2.3% year-to-date

• DJ Wilshire REIT ETF (RWR): up 1.4% year-to-date

• iShares Cohen & Steers Realty Majors (ICF): down 0.2% year-to-date

For more stories about REITs, visit our REIT category.