Real Estate in the Midst of Bull Market

Have you seen the recent performance of the Real Estate ETF IYR over the last six months. It may be worth your while looking over the performances of companies within this ETF and similar. This is quite a broad based rally, with IYR outperforming the DOW and S&P 500.

A review of the Russell 2000 Real Estate and Home building indices are replicating this upwards pattern.

Is this just another "dead cat bounce"? Now no one knows for sure. Taking into consideration some of our previous analysis, plus a range of internal work, we have positioned long for this sector and are accumulating.

Over the last six months we have seen one or more spectacular market rallies, and also witnessed some of the most bearish punditry that I have ever seen. The phrase "secular bear market" was once echoing around the airwaves and print articles; but now seems to have no friends at all.

Based upon the above, I think you can see that we are positioned long and firmly in the bullish camp.

Does any one else care to share what they are trading and why?

Disclosure: Long IYR, XHB

Comments

[Michael Clark]

These charts look positive only as long as helicopter Ben crucifies the US Dollar so that real assets can survive. Once TBonds (and mortgage bonds) are allowed to float in the market, and make it on their own, rates rise, stocks fall, real estate falls, real estate ETF's collapse. This is not a rally -- it's a reprieve. This is putting money in one pocket (through asset support) and taking it out of the other (through Dollar depreciation).

2009 Sep 23 06:22 AM

[valuestocksonly]

What a crap article. If it wasn't for all the goverment spending of taxpayer dollars the housing market would be toast. The sales are distressed properties. The next wave will be hitting soon. Very soon!

2009 Sep 23 09:02 AM

[David Van Knapp]

These markets are a trend trader's delight. I've been investing into SPY and QQQQ since April, despite all the negative prognostications (see my 4 articles on Seeking Alpha about this rally). I have not looked into sector-specific ETFs, I'm sure that some have been better than the broader ones like SPY. The key to investing (or "trading" if you wish) this way is to have your exit strategy pre-set via sell-stops. My profits are not booked yet, but they are safe.

I don't agree with the author that the phrase "secular bear market" has no friends any more. Many, many article writers and commenters are convinced that we are in about year 10 of a 16-year secular bear market that began in 2000. It doesn't matter, though: Whether this is a dead-cat bounce, a bear-market rally, or the beginning of a new bull, it has been spectacularly investable. That's what counts.

2009 Sep 23 09:42 AM

[REITBull]

I'd still be buying IYR or URE. The recent IRS ruling on REMIC makes loan mods on CMBS more feasible. Longer term, supply-demand fundamentals would favor rent increases on many of the properties held by the REITs in IYR, with the Residential REITs being the exception.

XHB looks dangerous to me. The Fed buying up bonds has propped this market up as other readers have pointed out. Not to sound like a broken record, but the supply-demand fundamental on the Res side is a mess.

2009 Sep 23 12:45 PM

[Thomas J. Gordon]

I didn't have the guts to go long reits generally but I did go long a few apartment reits thinking there might be some kind of move down affect from owner occupied and thinking that apartments have some stability in a down economy. I did a lot better than I expected. But I don't have the guts to go long office reits, hotel reits and the rest of the reit space.

2009 Sep 23 04:34 PM

[Jeff Nielson]

There is ZERO possibility of the U.S. real estate market hitting bottom for several more years - due to the MASSIVE overhang of inventory.

There would not even be the current, momentary stabilization if not for U.S. banks deliberately holding MILLIONS of foreclosed/repossessed properties off the market.

In the recent story about the Wells Fargo v.p. caught partying in a foreclosed home, NO ONE paid attention to the fact that the home was only available for parties because Wells Fargo had ordered it held off the market.

Meanwhile the largest wave of option-ARM mortgage resets is just about to start - and peak over the next two years.

Then the retiring baby-boomers have to dump $1-$2 trillion of real estate onto the market to try to boost their underfunded retirement portfolios.

2009 Sep 23 05:56 PM

[John Gault]

Reuters recently cited that 41% of subprime mtgs. were in default; what all you nervous Nellies fail to see, is the good news. More than HALF of the loans aren't in default!

With the job loss numbers coming in "less bad", it's time to buy retail reits! We only lost 200,000 jobs, it's a lagging indicator, everything is gonna be terrific.Default, shmefault. Vacancy, shmacancy. They're gonna be the survivors, right? Just like Centex and Hovnanian.

Oh, wait. Taubman just gave back two malls this morning. They still have 21 left though! That's good news, right? Buy Mar10 25strike puts on TCO.

2009 Sep 23 08:00 PM