Seaferer20

A Closer Look at REIT-Treasury Yield Spreads (1971- Present)

I like health care REITs at this point in time, despite the fact that they’re trading at a 22% premium vis-à-vis the 12% average equity REIT discount. With an average 5.3% yield that sure beats the 3.7% 10-year Treasury. As the boomers age demand will climb for seniors’ residences, assisted-living facilities and nursing homes. Of course there are risks. Uncle Sam may cut back on Medicare and Medicaid nursing home funding, especially if the Democrats are elected. States medical expenditures may also be slashed as states see more red ink going forward. Although the current economic downturn may already be priced into health care REIT NAVs, lessening the opportunity for cap gains, but as a relatively safe place to make an excellent yield they sure are appealing.