We have to remember that all real estate investing is not tied to the housing market. The real estate (REIT) exchange traded funds (ETFs) were among the ETFs hit the hardest this summer from the subprime mortgage meltdown and subsequent credit crisis. However, REITs have been on a steady rebound since the market low on Aug. 15. For example, the DJ Wilshire REIT ETF (RWR) has increased 18.5% since Aug. 15. Although it’s still down 0.4% year-to-date, it’s very close to breaking above its long-term trend line. Other REIT ETFs that are trending upward include iShares Cohen & Steers Realty Majors (ICF) and iShares Dow Jones U.S. Real Estate (IYR). Since the market low, ICF is up 20.3%, and IYR is up 17.6%.
One of the biggest factors that helped REITs rise was the Federal Reserve’s rate cut. Randyl Drummer for CoStar Group says other evidence that points to a continuing rebound for REITs and REIT ETFs include:
- Capital markets have loosened some, and demand is up for bonds.
- Shares of industrial real estate investment trusts rose recently after Banc of America Securities upgraded the sector and lifted the ratings on ProLogis (PLD) and AMB Property Corp. (AMB). Shares of office REITs also rose, even after Banc of America Securities downgraded the sector and cut ratings on three large players.
- A quarterly survey of investors confirmed a belief in the investment community that underlying fundamentals remain relatively strong across most sectors of commercial real estate, despite housing woes, a slowdown in job growth and a slight rise in unemployment.
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.