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REITs: Laggards, but for how long?

March 30, 2017

REITs: Laggards, but for how long?

Rising rates and high expectations have hurt the real estate vehicle, but a few factors could brighten its outlook

March 29, 2017 | by John Waggoner | InvestmentNews.com

In this market, looking for bargains is like looking for a good show on local cable at 2:00 in the morning. While commercial real estate isn’t cheap, REITs offer decent yields — and the chance to buy something that hasn’t participated in the latest bull move.

Even though the Standard & Poor’s 500 stock index has gained 18.3% the past 12 months, the real estate sector has risen just 6.1%, according to Morningstar (MORN). Even in the rally this year, buoyed by the prospects of tax cuts and reduced government regulations, REITs have gained just 0.6%, versus 5.9% for the blue-chip index.

What gives? Traditional reasons for REIT underperformance, for a start. The 10-year Treasury note rose from 1.37% in July last year to 2.61% on March 13. Wall Street often sees REITs, like utility stocks, as bond proxies, and bond prices fall when interest rates rise.

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Second Annual Blue Vault Broker Dealer Educational Summit 2016
2016 Broker Dealer Educational Summit 2016
May 30, 2016

Best Due Diligence meeting in the industry. No sales pitches, senior level decision makers, meaningful discussions and the Broker Dealer networking sessions were especially useful. Thanks to Blue Vault for raising the bar!