PRICE TRENDS / WAR OF THE WORLDS (Part 4): Property owners nationwide have lost only one dollar for every four dollars they can ultimately expect to lose on their home.

As we take a moment to reflect on the past year, it becomes obvious that the housing market bust crippled the economy. What made this cyclical bust in the real estate and related ETF markets different from the others?

Unrealistic assumptions, multiple layers of investors and obscene prices in the commercial real estate market are all part of the reason why the current housing bust is costlier and more complicated than previous ones, comment Mara Der Hovanesian and Dean Foust for BusinessWeek. Average housing prices have already plummeted 41% from the 2007 peak.

This highlights the chicken-and-egg type problem that the CMBS market faces. Everyone knows that the new origination will be of higher quality and so should have tighter spreads than the legacy bonds. Yet, lacking an efficient hedge, all that the originators have for indication of spreads are the legacy bonds, which are still too wide for new issue deals. In other words, originators are looking for tighter and stable bond spreads to originate, and market is looking for new collateral for tighter spreads – sort of a chicken-and-egg type problem.

I just read a post on the CRE blog Net Lease Nation talking about the upcoming holiday season. Apparently, Fitch Ratings is bullish on the retail sector:

Many companies across Fitch’s U.S. retail coverage have been managing inventory positions well. Gross margins have rebounded for those companies in the discretionary categories that were hit particularly hard during the 2008 holiday period. This, combined with strong cash flow management and the resolutions of liquidity issues for several companies, has resulted in an improved overall credit outlook.

There are so many real estate-focused ETFs and many investors have so little time to really investigate where their money is actually going. There are four major funds to look at and pull apart to consider if they are worthy of your portfolio.

There is some good news for housing, as new home sales in the U.S. grew in August to the highest level in over one year. Builders cut pricing to compete with foreclosures and previously owned homes, reports Bob Willis for Bloomberg. If the worst housing slump since the Great Depression is finally turning, there are good ways to play the upward trend.

ETF Spotlight on SPDR Dow Jones REIT (NYSEArca: RWR), part of a weekly series.

Assets: $1 billion

Many analysts and experts feel that real estate investment trusts, or REITs, and REIT ETFs could be poised for a rally that resembles the heady 1990s once the market recovers.

Once the commercial property market begins to recover, real estate investment trusts, or REITs, could be the front runner for the asset class. Anton Troianovski for The Wall Street Journal reports that the recovery environment could reflect the 1990s, when many real-estate developers went public to avoid bankruptcy and helped turn real-estate investment trusts into a major force in the property market.

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

Dow Jones & Co. has begun searching for potential buyers of its stock market indexing unit, which includes the widely-reported Dow Jones Industrial Average.

The unit of Dow Jones, which publishes the Wall Street Journal and was purchased by News Corporation (NWS) in late 2007, creates and licenses indexes for use by ETFs, mutual funds, and other products.

Managed futures has been long recognized to be an excellent portfolio diversifier.

However, long only commodity investment is not good enough. For example, in this 2008-2009 period, commodity ETFs such as DBC, GSG based on broad based commodity indexes and most of ETFs based on narrow commodity industry indexes such as DBA, DBE, DBB did not do well.

The table below is the latest set of forecasts published. It shows predictions from ten industry participants on where recent vintage (i.e. 2006 to 2008 deals) CMBS spreads will be six months later. Some observations follow.

REITs could be facing a mountain of trouble. But if the sector’s shares and related ETFs play their cards right, they could emerge from the mess unscathed.

REITs own a range of real estate, including office buildings, strip malls and apartment buildings. The sector has a heavy debt load, but if REITs can roll it over, the shares may not suffer. REITs already have rallied about 90% from the 18-year low they hit in March as the drop-off in home prices and economic conditions has slowed, reports Donna Kardos Yesalavich for The Wall Street Journal.

Commercial real estate and the sector’s related ETFs are in a potentially perilous position. That leaves just one question: is it a buying opportunity, or is it time to go short?

Some investors have such a doom-and-gloom feeling about what lies ahead for commercial real estate that they’re considering whether shorting the sector is worth it. After all, storefronts lie vacant, vacancies are up in many major cities and office space sits empty.

Risky assets last week again marched higher to the tune of economic data supporting the argument of a global economic recovery. A realization among investors that the economic transition from recession to recovery was gaining momentum resulted in many global stock markets and commodities scaling fresh peaks for the year.

The S&P 500 Index closed the week above the psychological 1,000 level, marking its highest level since November and capping four consecutive weeks of gains. And more upside lies ahead, said Abby Joseph Cohen, Goldman Sachs’ market strategist, who expects the Index to reach the 1,100 point by year end. (Is this a contrary indicator coming from a permabull?)

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

Equity REITs in the US have been rising since the March lows like most categories, but have surged in the past few days, as the larger US and international stock markets have moderated their rise, including some recent down days.