In recent months, the U.S. housing market has shown signs of life, with several major metropolitan areas eking out small month-over-month gains. While home prices remain well below year-ago levels, there are at least signs that the worst has passed, and a modest recovery is now underway.

Unfortunately, the same can’t be said about the rest of the U.S. real estate market. Apartment vacancies recently surged to 7.8%, the highest level since 1986.

After an impressive collapse of the international housing market, risk-averse investors are now seeking to invest in safer overseas properties. Interest in conservative and long-term property investments may be just the thing to stabilize international real estate exchange traded funds.

According to mortgage specialist Conti, property investors looking to snatch up houses overseas are sticking to proven, more traditional locations for long-term investment, according to NuWire Investor.

Mortgage delinquencies on residential real estate are accelerating, not decelerating. Similarly, an estimated $3.5 trillion in commercial loans are in danger of default, with no clear path to refinancing or modification to prevent massive foreclosures.

Does this spell disaster for real estate investment trusts (REITs)? Surprisingly, the answer may be “no.”

Like most in the financial sector, real estate investment trusts (REITs) are enjoying a renaissance. Yet with a wave of commercial real estate foreclosures in the making, and the possibility that widespread unemployment will keep residential housing under wraps, investors wonder how long REITs can tow the ”economic recovery” line.

Indeed, it’s fairly well-established that a number of REITs have extraordinary debts coming due. Some have been paying dividends from stock instead of earned revenue or cash on hand, watering down the stake of current shareholders. And while some of the REIT index companies may have fairly stable assets in medical office buildings or health-related, long-term care facilities, many other office and industrial complexes are being crushed.

Here is a list of 73 exchange traded funds with at least $100 million market-cap, at least $1 million daily Dollar trading volume, and at least 3% annualized last dividend yield.

click image to enlarge

I decided to run an ETF screen over at FINVIZ.com for the following:

1) Yield > 4% (to give you perspective, a 10 year treasury bond yields around 3.79%)
2) Average Volume > 50k shares
3) Trading Above the 200 Day Moving Average

After decades of flying high and shrugging off crises around the world, U.S. equity markets have fallen on some tough times. The epicenter of the mortgage crisis that evolved into a global recession has scared away many investors away from the U.S. markets, afraid that the worst is yet to come and that the “glory days” of America have passed.

Investor reluctance to jump back into the U.S. markets is perhaps best evidenced by the increase in popularity of “ex-U.S” ETFs, funds that offer exposure to a well-diversified basket of global securities but avoid any investments in the United States.

If there's a more beleaguered and battered segment of investing than real estate, I haven't seen it. The iShares Dow Jones US Real Estate Fund (IYR) is down -14% in 2009 after 6 short months; it dropped approx -40% in 2008 and nearly -20% in 2007.

At the moment, IYR is roughly 65% off its 2007 peak. More importantly, however, the price of iShares Dow Jones US Real Estate Fund (IYR) has not convincingly held above its long-term (200-day) moving average since April, 2007. An investor may be wise to wait for a genuine break-out above the trendline before allocating to domestic REITs.

With a roller coaster six months behind us that saw no shortage of interesting twists and turns and unsuspected headlines, we’ve finally reached the midway point of 2009.

Ahead of us is the highly anticipated “second half of 2009,” which for months we’ve heard will hold returns to growth, a recovering economy, and enough green shoots feed a revolution (possibly the one taking shape in the streets of Iran?).

As the first half of 2009 draws to a close, it seems that we’re finally starting to see things return to some semblance of normality. Equity markets have rallied sharply since bottoming out in March. Volatility is back within its historical range after hitting record highs over the past year. And politicians in Washington have been able to slowly turn their attention from the economy to other important disagreements, such as how to proceed in Iran, how to reform healthcare, and what to do about America’s dependence on foreign oil.

But despite all these green shoots in the economy, U.S. real estate ETFs remains stuck in a rut, lagging far behind global rivals who have enjoyed tremendous rallies in recent months.

By Brandon Clay

By Eric Roseman

One of the biggest casualties of the global financial crisis is the big bust now underway in REITs, or real estate investment trusts. Until mid-2007, U.S. REITs dominated global investment performance in the post-2000 tech stock "bubble" era with eye-popping 25% annualized returns.

Alpha persistence in long short hedge funds. This study gives a lot of support to the upcoming AlphaClone software launch.

This is similar to private equity, where the top funds continue to outperform. Why doesn't this happen in mutual funds? A couple reasons (including index hugging), but the simplest is the capitalism 101 - the $ attracts the best talent.

Boeing, Durable Goods Ground Transportation, Aerospace ETFs

A double whammy of bad news took the aerospace and defense ETF lower yesterday.

First, orders for durable goods (those items meant to last three years or more) were stagnant last month. Metals, machinery and autos were among the items that felt slowing demand in May, reports Bob Willis for Bloomberg.

The four big asset classes are stocks, bonds, cash and real estate. Direct ownership of real estate is the pure form of the asset class. To achieve diversification within the financial capability of most investors, securitization of a direct real estate portfolio (REITs) is a second best solution.

REIT vs REAL ESTATE FUNDS:

There's been a quote from Ron Lieber (not the actor) in a NY Times article making the rounds that I think is very constructive.

He says: Index (mostly). Save a ton. Reallocate infrequently.

A reader left a question asking how much to allocate to REITs in a portfolio. He noted David Swensen's 20% suggestion and wondered if that number is too high. The reader also asked about foreign REIT exposure.

To me this is like asking how much to put in commodities. For either question, there is no shortage of smart people and well-written white papers suggesting big numbers to these asset classes.

Friday Barclays Global Investors' iShares family launched eight international exchange-traded funds on two different exchanges.

The launch can be divided into three buckets: international small cap, real estate, and emerging markets.

Broad International REIT Index ETFs
iShares S&P World Ex-US Property Index Fund (WPS)
SPDR DJ Wilshire International Real Estate ETF (RWX)
WisdomTree International Real Estate Fund (DRW)
iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund (IFGL)