iShares REIT ETF Drops: Could Be a Long Way Down

The iShares Dow US Real Estate ETF (IYR) just fell out of a trading range yesterday. Looking at the chart below, you can also see it happened on a pickup in volume.

click to enlarge

I have written previous posts on how the problems in subprime mortgages were not really affecting the commercial side of the real estate market and, indeed, real estate investment trusts have held their value much better than the home builders. Unfortunately, the continued dismal news from the housing sector lately must finally be taking its toll on the REIT sector, too. With the value of real estate falling in some markets, perhaps rental properties and condos are not the attractive investments many REITs originally thought they were. With reports of retail sales down, building or owning malls may not be as lucrative as it once was either.

I have mentioned before that there is an inverse ETF that more or less tracks IYR. It is the ProShares UltraShort Real Estate fund (SRS). You may want to check it out. IYR will probably find support around $82. If it breaks below that level, it could be a long way down.

Comments

[Frank Li:]

Any thoughts on what's better: shorting IYR or buying SRS? How would they work out with dividends, expense ratios etc?

2007 May 17 03:44 PM

[Trade Radar...:]

I tend to look at holding the Ultra Inverse funds as a short-term reaction to market moves. As a result, I don't worry too much about the expense ratios. IYR does provide a dividend, the Ultra funds do not. If you are shorting IYR, you will not receive the dividend.

2007 May 20 01:51 PM

[thyname:]

Yes, I would be very interested in the question Frank asks (see above). In addition, since the the chart shown above is "daily" - does that mean that the support is broken today (5/17) with IYR closing below $82?

2007 May 17 04:20 PM