The U.S. housing crisis is taking its toll on other countries, and it could hit their exchange traded funds (ETFs) if it persists for long.
Real estate prices are plummeting in the Irish countryside, the Spanish coast and even parts of Northern India, reports Mark Landler for the New York Times. Some property analysts abroad are expressing fear of a wholesale collapse. Western European once were buying investment properties in places such as Warsaw and Estonia – but no longer. In India, prices have dropped 20% in the last year.
The International Monetary Fund cut its global economic growth forecast last Wednesday, and said the downturn could carry through to 2009.
The SPDR DJ Wilshire International Real Estate (RWX) could feel the pinch if the crisis continues to spread. Year-to-date, the fund is down 7.8%. Some single-country funds may also experience some bruising:
- The New Ireland Fund (IRL), down 2.9% year-to-date
- WisdomTree India Earnings (EPI), down 13.6% since Feb. 26 inception
- PowerShares India (PIN), down 6.7% since March 5 inception
- iShares MSCI Spain (EWP), down 3.1% year-to-date
The troubles stateside aren’t getting much better. J.W. Elphinstone for the Associated Press reports that home foreclosures jumped 57% in March. A rash of adjustable-rate loans are also scheduled to reset in May and June, as well, meaning yet more foreclosures are likely in the third and fourth quarters.
How will real estate ETFs react in the long run?:
- iShares Dow Jones US Real Estate (IYR), down 0.3% year-to-date
- iShares Cohen & Steers Realty Majors (ICF), up 2.8% year-to-date
- DJ Wilshire REIT (RWR), up 2.4% year-to-date
For full disclosure, some of Tom Lydon’s clients own shares of EWP.