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- The raising of interest rates would be disastrous for the US property market. This measure would lead to more foreclosures and tenant evictions as mortgages struggle to be paid.
- When you factor in inflation, wage growth is not increasing in the US. No wage growth results in little investment - especially in the property market.
- Many hedge funds and speculators still hold many properties in the US. When property prices slide, these assets will be dumped hurdling the property market significantly lower.
- Last week's choppy trade was driven by good news from homebuilder sentiment and Lennar, which contrasted against a softer housing starts data point.
- This week offers heavy hitting data points from existing & new home sales, house pricing information, a clean mortgage data point and earnings from K.B. Home.
- Supported by a Barron's note, Bank of America's revival should lift all ships in real estate, and I continue to recommend investment in the broad spectrum and real assets.
- The iShares U.S. Real Estate and the whole of housing enjoyed quite a joyride Wednesday, as several sector data points drove real estate relative issues mostly higher.
- Better mortgage activity, higher home builder confidence, Fed inaction and a solid report from Lennar supported the whole sector.
- Moving forward, I expect the real estate sector, now burdened by expectations for higher interest rates, to benefit more greatly from an improved economy and labor situation.
- The rising interest rate trend of this year has recently reversed since the start of August, offering a respite for prospective home buyers and American dream seekers.
- As a result, real estate relative stocks have enjoyed a revival this month, with some erasing portions of year-to-date losses inflicted by the previously rising rate trend and other factors.
- However, the cause of the reversal in interest rates should either be short-lived or deteriorate into an economically damaging situation. Both scenarios mean the latest oasis is a mirage.
The REIT Sell-Off Trifecta: Further Weakness Ahead
Are We Witnessing Another Housing Bubble In The U.S.?
Find Above-Market Returns With Specialty Real Estate ETF
There are no Transcripts on IYR.
Tue, Nov. 18, 8:53 PM
- Office-building landlord Paramount Group (Pending:PGRE) raises gross proceeds of $2.29B, selling 131M shares at $17.50 each, the midpoint of its expected price range.
- It's been a hot year for IPOs in general, but not for REITs - this is just the 5th REIT offering in 2014 despite a major rally for the sector (total return of 24% vs. the S&P 500's 11% gain). “Right now you don’t have to go public," says a portfolio manager. "There’s an enormous amount of capital both domestic and international chasing U.S. real estate."
- Previously: Paramount Group files for largest-ever REIT IPO
- Related: Paramount Group's IPO Will See Great Investor Demand
- ETFs: IYR, VNQ, DRN, URE, SRS, ICF, RWR, SCHH, KBWY, DRV, REK, FRI, FTY, PSR, FNIO, WREI
Wed, Nov. 12, 3:14 PM
- REITs - particularly those focused on retail properties - have been big winners since the financial crisis, with the S&P 1500 Retail REIT industry group's near-500% total return since the March 2009 bottom double that of the broad market. Among the members of that index are SPG, MAC, and NNN.
- In 2014, the MSCI U.S. REIT index is up 26% vs. 10% for the S&P 500.
- "We're turning over rocks for opportunities, but it's clear that REITs are not cheap," says one fund manager. Among the risks, naturally, are higher rates which could boost the attractiveness of cash and bonds vs. the dividend yield of REITs (now averaging 3.5%). The group is also substantially more levered than most others, so higher rates at some point mean higher borrowing costs.
- ETFs: IYR, VNQ, DRN, URE, SRS, SCHH, RWR, ICF, DRV, KBWY, REK, FRI, FTY, PSR, FNIO, WREI
Tue, Nov. 11, 7:57 AM
- Acknowledging that the inclusion of REITs in the financial sector just isn't cutting it anymore, S&P Dow Jones Indices and MSCI announce the creation of a new Real Estate sector for their indices. FInancials will be redefined to exclude real estate.
- MSCI's Remy Briand: "Investors told us that there are significant differences between public Real Estate and Financial companies and therefore Real Estate deserves a dedicated GICS Sector."
- The proposed implementation date is after the close on August 31, 2016, but feedback from market participants could change this.
- Source: Press release
- ETFs: IYR, VNQ, DRN, URE, SRS, RWR, SCHH, ICF, DRV, KBWY, REK, FRI, FTY, PSR, WREI
Fri, Oct. 31, 12:49 PM
- The FTSE NAREIT All REIT Index climbed 6.94% through October 29 vs. the S&P 500's return of 0.62%. Strong earnings reports from REITs helped, but maybe helping more was a steep drop in interest rates amid the broad market's major swoon during October's first two weeks.
- Leading the way for REITs were manufactured homes up 10.19%, followed by industrial (9.79%), healthcare (9.77%), and shopping centers (9.43%).
- Among the REIT laggers were timber (up 4.42%), mortgage REITs (3.71%), and infrastructure (1.89%).
- ETFs: IYR, VNQ, DRN, URE, REZ, SRS, RWR, SCHH, ICF, ROOF, DRV, KBWY, RTL, REK, FRI, FTY, PSR, FNIO, IFNA, GQRE, WREI
Mon, Oct. 13, 4:19 PM
- Both equity and mortgage REITs saw plenty of buying as nearly all of the rest of the market was lit up bright red, and Treasury ETFs signaled a sharp drop in yields when government bonds reopen for trade tomorrow (closed this session for Columbus Day).
- A sampling of equity names: Senior Housing Properties (SNH +1.2%), Medical Properties Trust (MPW +1.4%), Gramercy Property Trust (GPT +1.7%), Equity Residential (EQR +0.7%), Inland Real Estate (IRC +0.9%), Sovran Self Storage (SSS +1.1%), Highwoods Properties Trust (HIW +1%).
- One equity REIT sector in the red along with the rest of the market is lodging amid worsening Ebola fears: Ashford Hospitality Trust (AHT -2.9%), Sunshine Hotel Investors (SHO -1.4%), LaSalle Hotel Properties (LHO -1.5%), Summit Hotel Properties (INN -1.5%).
- Mortgage REITs: American Capital Agency (AGNC +1.4%), CYS Investments (CYS +2.2%), Invesco (IVR +1.1%), American Capital Mortgage (MTGE +1.5%), Western Asset (WMC +1.1%).
- ETFs: IYR, VNQ, REM, MORL, MORT, DRN, URE, REZ, SRS, RWR, SCHH, ICF, ROOF, DRV, KBWY, RTL, REK, FRI, FTY, PSR, IFNA, FNIO, WREI
Fri, Oct. 10, 11:42 AM
- The FTSE NAREIT All REITs Index gained 13.08 during the year's first nine months, and had a dividend yield of 4.31% as of September 30. The S&P 500 had a total return of 8.34% over the same period, and a dividend yield of 2.06%.
- The big YTD performance comes even after a 2.63% decline in the just-ended Q3 (vs. the S&P's 1.13% decline).
- Apartment REITs (EQR, AVB, ESS, PPS, UDR, to name a few) have been the biggest winner so far this year, with total return of 20.29% In second place at 16.76% are self-storage REITs (PSA, SSS, CUBE, EXR).
- Mortgage REITs (REM, MORT, MORL) had a total return of 12.69%.
- Broad REIT ETFs: IYR, VNQ, WPS, VNQI, DRN, RWX, URE, SRS, RWR, SCHH, ICF, RWO, IFGL, DRV, KBWY, DRW, REK, FRI, GRI, FTY, FFR, RWXL, PSR, WREI, REET
Thu, Oct. 9, 12:21 PM
- A check of 900 corporate and public defined benefit plans between 1998 and 2011 found listed equity REITs - with an average annual net return of 11.31% - edged out private equity (11.1%) as offering the highest net returns of any asset class, according to a soon-to-be-released report from CEM Benchmarking.
- Coming in third were real assets other than real estate - infrastructure, commodities, natural resources - at 9.85%.
- Why start in 1998? That's when CEM first began separating REITs from stocks in its surveys.
- Costs are of key import. The average fee for REITs over the period was 51.6 basis points vs. 238.3 bps for P-E, and 102.6 bps for "other" real assets. U.S. broad fixed income had the lowest costs - just 17.3 bps - but produced an average net return of just 6.56%.
- ETFs: IYR, VNQ, WPS, VNQI, DRN, RWX, URE, SRS, RWR, SCHH, ICF, RWO, IFGL, DRV, KBWY, DRW, REK, FRI, GRI, FTY, FFR, RWXL, PSR, WREI, REET
Fri, Oct. 3, 2:38 PM
- A big year for REITs took a pause in September, helped along by a strong rise in interest rates for most of the month. The FTSE NAREIT Index fell 5.63% last month, well below the S&P 500's 1.4% decline.
- Infrastructure REITs were the best-performing REIT sector for the third straight month, falling 2.11%. The best-performing sector in 2014 - up 20.29% - apartment REITs had a particularly tough September, falling 7.51%.
- Year-to-date, the REIT sector has returned 13.08% vs. the S&P 500's 6.6% gain.
- ETFs: IYR, VNQ, DRN, URE, REZ, SRS, RWR, SCHH, ICF, ROOF, DRV, KBWY, RTL, REK, FRI, FTY, PSR, IFNA, FNIO, WREI
Wed, Sep. 24, 10:08 AM| Comment!
Mon, Sep. 15, 12:16 PM
- REIT investors worried about the link - and it's a close one of late - between interest rates and the value of REIT stocks (they go down when rates rise, up when rates fall) might want to take a look at non-U.S. REITs, where the correlation is far lower, says AllianceBernstein's Eric Franco.
- Another advantage of non-U.S. REITs - their ratio of cash flow yield to bond yields is well above the long-term average, i.e. they're cheap. The ratio for U.S. REITs is right at the long-term average.
- Broad U.S. REIT ETFs: IYR, VNQ, DRN, URE, SRS, RWR, ICF, SCHH, DRV, KBWY, REK, FRI, FTY, PSR, WREI
- Global REIT ETFs: WPS, VNQI, RWX, RWO, IFGL, DRW, GRI, IFEU, FFR, RWXL, REET
Fri, Sep. 5, 3:16 PM
- Comparing "round-trip total returns" on 34 non-traded REITs with those of their publicly-listed peers, Green Street Advisors found the non-traded vehicles lagged the public ones by an average of 360 basis points per year.
- It turns out the key selling point of non-traded REITs - since they're not priced on a regular basis (sometimes for years at a time), they lack volatility, and therefore allow investors to sleep better at night - is actually their weakness.
- "The institutional investment community has convinced itself that the short-term volatility that necessarily accompanies liquidity equates to higher long-term risk," says Green Street. "In other words, liquidity is a bad thing ... Logic like that would conclude that the best way to avoid unpleasant medical news is to never visit the doctor.”
- ETFs: IYR, VNQ, WPS, VNQI, DRN, RWX, URE, SRS, ICF, RWR, SCHH, RWO, IFGL, DRV, KBWY, DRW, REK, FRI, GRI, FTY, FFR, RWXL, PSR, WREI
Wed, Aug. 20, 3:35 PM
- UBS O'Connor LLC is a $5.6B hedge fund unit within the Swiss bank, and it has cut REIT holdings across the board by more than $900M after racking up big gains in the stocks this year.
- The biggest reductions were in Mid-America Apartment Communities (MAA +0.3%), AvalonBay (AVB +0.8%), and Equity Lifestyle Properties (ELS +0.2%), and other holdings include Redwood Trust (RWT -0.8%) and American Realty Capital (ARCP +1.1%).
- ETFs: IYR, VNQ, DRN, URE, REZ, SRS, ICF, RWR, SCHH, ROOF, DRV, KBWY, RTL, REK, FRI, FTY, PSR, IFNA, FNIO, WREI, GQRE
- SEC Form 13F
Fri, Aug. 8, 3:27 PM
- The FTSE Nareit All REIT Index posted a return of -0.19% in July, outperforming the S&P 500 by 119 basis points. Infrastructure REITs led he way, returning 2.87%, with apartments (+2.44%) and manufactured homes (+2.14%) also among the better-performing REIT sectors.
- Office REITs were negative by a small handful of basis points, but have returned 17.72% YTD, and investor cooled on the previously hot lodging sector with a total return of -2.2%. Timber was hit hard, returning -5.4% and bringing its YTD gain to just 0.34%.
- ETFs: IYR, VNQ, DRN, REZ, URE, SRS, ICF, RWR, SCHH, ROOF, DRV, KBWY, RTL, REK, FRI, FTY, PSR, IFNA, FNIO, WREI
Tue, Jul. 29, 3:20 PM
- The FTSE Nareit All REITs Index posted a total return of 16.14% in H1 and offered a 4.03% dividend yield as of June 30. Equity REITs were up 16.25% with a dividend yield of 3.52%. The S&P 500, by comparison, had a total return of 7.14% and a dividend yield of 2% on June 30.
- The top-performing equity REIT sector was the apartments with a 23.54% total return, while Office REITs delivered 17.78%. Closely behind were Health Care REITs and Lodging/Resort REITs at 17.59% and 17.26%, respectively, then Retail REITs at 15.97%.
- The Mortgage REITs Index was up 17.73% in H1, with commercial financing up 14.03% and residential up 19.28%.
- Full report
- ETFs: IYR, VNQ, WPS, VNQI, DRN, RWX, URE, SRS, ICF, RWR, SCHH, RWO, IFGL, DRV, KBWY, DRW, REK, FRI, GRI, FTY, FFR, RWXL, PSR, IFNA, FNIO, WREI
Thu, Jul. 10, 10:17 AM
- Working today as both stock and bond yields fall in response to banking troubles in Portugal are both equity and mortgage REIT names.
- Leading in the mortgage REIT sector are Annaly (NLY +0.8%) and American Capital Agency (AGNC +0.8%), and a sampling of equity REIT names: Realty Income (O +0.6%), Omega Healthcare (OHI +1%), Ventas (VTR +1.2%), Medical Properties (MPW +1%), Avalon Bay (AVB +0.5%), Simon Property (SPG +0.8%), Boston Properties (BXP +0.8%)
- ETFs: IYR, VNQ, DRN, URE, SRS, ICF, RWR, SCHH, DRV, KBWY, REK, FRI, FTY, PSR, FNIO, WREI, REM, MORL, MORT
Wed, Jul. 9, 2:33 PM
- The office vacancy rate fell 30 basis points to 14.5%, besting Q1's 10 basis point decline, according to the latest analysis from CBRE. Top performers were those markets with exposure to tech and energy.
- National industrial availability fell 30 bps to 10.8%, and retail availability fell 20 bps to 11.7%.
- The apartment vacancy rate of 4.4% is 20 bps lower than a year ago, with effective rent growth remaining in the 2.5-3% range.
- ETFs: IYR, VNQ, DRN, URE, SRS, ICF, RWR, SCHH, DRV, KBWY, REK, FRI, FTY, PSR, IFNA, FNIO, WREI
IYR vs. ETF Alternatives
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