REITs, or real estate investment trusts, and their related exchange traded funds (ETFs) have long been eyed as the “next shoe to drop.” So far, though, that shoe is still up in the air. Is it still primed for a fall?
As early as 2008, stories were warning that the commercial real estate market would fall through the floor and that hundreds of billions of dollars of commercial mortgages would default, says Michael Kahn for Barron’s.
Recently, just the opposite has occurred. Commercial real estate investment trusts (REITs) have been soaring over the past few weeks, and the technical indicators have looked prime.
Kahn says that commercial REITs not only rose, but also outperformed the market the during the current summer rally. The sector halted its decline around November 2008, although it did hit a lower low in March, but not by much.
Commercial property tied to consumer spending patterns such as hotels and shopping malls do remain weak, says Ron DeLegge for ETF Guide, and the rental market has a way to go before stabilizing. If a REIT ETF or investment is appealing, mind the trendlines and be sure to enter and exit with a strategy.
A few related ETFs, although there are many more available:
- First Trust S&P REIT Index Fund (FRI): up 8.4% year-to-date
- iShares Dow Jones U.S. Real Estate Index Fund (IYR): up 10.6% year-to-date
- iShares FTSE NAREIT Real Estate 50 Index (FTY): up 6.9% year-to-date
For more stories about real estate, visit our real estate category.