Are REITs correlated with rates?


"The urban myth is that there's a lock-step correlation between rising rates and REIT performance," says NAREIT economist Michael Grupe. "REITs are clearly not [bonds]."

Pointing to 16 periods since 1995 when rates rose sharply, but REITs performed well, Grupe says the sector's troubles since last spring is an overreaction to uncertainty.

Green Street Advisors' Mike Kirby takes the other side of the argument, calling REITs hybrid securities that behave like stocks sometimes and bonds at others. "History shows that when rates spike, REITs fare poorly."

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Comments (3)
  • Brian Bobbitt
    , contributor
    Comments (2083) | Send Message
     
    I don't think anything is in, as you put it, 'lockstep'. But, interest rates are a major factor in which those controlling the mREITs are needing to be aware of, and adjust their purchases and selling to. There are myriad factors. Not a good idea to put any investment on a track, and say, this is what it is. The world changes, and their managers are paid big time to be aware and change with it. I don't care for REITs at this time, but careful grooming may pay off. Too much work for me.
    Capt. Brian
    The Lost Navigator
    15 Jan 2014, 04:59 PM Reply Like
  • Jerbear
    , contributor
    Comments (1202) | Send Message
     
    This just proves my thesis: For every analyst that says an investment is a buy. I will show an analyst with equal credentials that says it is a sell.

     

    These over paid analysts typically know nothing.
    15 Jan 2014, 08:11 PM Reply Like
  • fullero
    , contributor
    Comments (6) | Send Message
     
    REITs have been under pressure because of the fear that cap rates will rise. Since many, including me, think rates will rise and eventually cap rates will rise, the best hedge is to simply short treasury futures against your REIT positions. The ONLY things that make cap rates go up are rising rates or oversupply and there is certainly no oversupply. So far, cap rates have not started to rise but eventually they must as investors will only take so low a levered return. If rates don't rise or rise slowly, REITs can perform well as rents begin to move higher.
    19 Jan 2014, 10:51 AM Reply Like
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