REIT ETFs Have Appeal Despite Gloomy Real Estate Market

December 31st at 3:00pm by Tom Lydon

newyork_manhattan_hearsttower_287853_tn Real estate investment trusts, or REITs, have been a source of stability and nice yields. Lately, this has not been the case. Does this mean you should count out REIT exchange traded funds (ETFs)?

The month of December was a winner for many REIT ETFs, as most of them climbed to the top of charts, despite a dreary real estate market. Gary Gordon for ETF Expert says a cynic might argue that the run-up in REIT ETF purchases is merely a function of year-end yield hunting. Yet quarterly income payments of 1.3% hardly accounts for a chase that resulted in 9%-10% in capital appreciation over the course of a single month. [Why put a REIT ETF in your portfolio?]

The larger, more diversified ETFs did have the best performances, as opposed to the more selective funds. The recent performance may be attributed to the fact that the biggest REITs were able to raise enough capital in the financial crisis, and they are now showing that they will indeed be survivors. [What is going on with commercial REITs?]

Although real estate prices and the state of the market do not support this theory for the long-term, we will just have to mind the trend lines and keep an eye on the moving averages. Be sure to have a strategy in place and be ready to implement it. [How to follow trends.]

For more stories about REIT ETFs, visit our REIT category.

  • iShares Realty Majors Cohen & Steers (NYSEArca: ICF): up 28.1% year-to-date
  • SPDR Dow Jones REIT Index (NYSEArca: RWR): up 29.6% year-to-date
  • Vanguard REIT (NYSEArca: VNQ): up 30.4% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.