Assessing The Impact Of Mortgage Rates On REITs

Oct. 05, 2024 5:00 AM ETAMH, INVH, AVB, CPT, UDR, EQR, ESS, MAA, PSA, EXR
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Chilton REIT Team
1.81K Followers
(14min)

Summary

  • Historically, REITs outperform the S&P 500 after rising interest rates, with recent data showing a 25% return from May to September 2024.
  • Mortgage rates impact REITs differently, with lower rates boosting rental demand for multifamily and SFR REITs, but potentially increasing home prices.
  • The "lock-in effect" limits home sales, benefiting multifamily and SFR REITs by driving rental demand, while self-storage REITs await increased home sales.
  • Lower mortgage rates could reduce REITs' capital costs, enhancing cash flow and valuations, with multifamily REITs like AvalonBay and Camden Property Trust well-positioned.

Aerial view of Single-family homes

ferrantraite

Historically, following periods of rising interest rates, REITs have outperformed the S&P 500 over the subsequent 90-, 180-, and 365-day periods as shown in Figure 1 below. We discussed this phenomenon in great detail in our May 2024 REIT

This article was written by

Chilton REIT Team profile picture
1.81K Followers
The REIT Team of Chilton Capital Management, a Houston-based investment adviser, is headed by co-portfolio managers Bruce Garrison, CFA, and Matt Werner, CFA. Mr. Garrison has over 40 years of experience analyzing public REITs both on the buy-side and the sell-side. Mr. Werner joined Mr. Garrison on the Chilton REIT Team in 2009. The REIT Team’s strategy primarily pursues investments in publicly traded real estate investment trusts (REITs) and real estate related entities based primarily in North America. The REIT Team believes public REITs are superior vehicles for investing in real estate due to their liquidity, transparency, and total return characteristics. Investing in public securities enhances the REIT Team’s ability to diversify by geography, sector, strategy, property, and tenant while maintaining portfolio liquidity. REIT property types include apartments, regional malls, shopping centers, lodging, office, industrial, self-storage, data centers/cell towers, and a variety of health care related facilities. The REIT Team focuses on traditional methods of security analysis; primarily research, critical thought and analytical depth, which are integral to their investment process. The REIT Team’s investment approach seeks to combine its real estate industry experience with traditional methods of security selection to make sound investment decisions in real estate companies. The Chilton REIT Team manages Separately Managed Accounts (SMAs) for high net worth individuals and institutions. Additionally, the REIT Team is the sub-advisor for an open-end investment company, the West Loop Realty Fund (tickers: REIIX, REIAX, and REICX). Before investing one should carefully consider the West Loop Realty Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus and summary prospectus, a copy of which may be obtained by calling 800-207-7108. Please read the Fund’s prospectus or summary prospectus carefully before investing. The Fund may not be suitable for all investors. We encourage you to consult with appropriate financial professionals before considering an investment in the Fund. Liberty Street Advisors, Inc. is the advisor to the Fund. The Fund is part of the Liberty Street family of funds within the series of Investment Managers Series Trust. The Fund is Distributed by Foreside Fund Services, LLC. Chilton Capital Management, LLC is an independently owned and operated firm formed in 1996. Chilton provides investment advisory services for registered investment companies, private clients, family offices, endowments, foundations, retirement plans and trusts. For more information about Chilton Capital Management’s REIT Team, please visit www.chiltoncapital.com/reit/ or email info@chiltoncapital.com. Additional information about Chilton Capital Management LLC is also available on the United States Securities and Exchange Commission’s website at www.adviserinfo.sec.gov. The searchable IARD/CRD number for Chilton Capital Management LLC is 104592.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AVB, CPT, AMH, INVH, PSA, EXR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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SymbolLast Price% Chg
AMH--
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INVH--
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AVB--
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CPT--
Camden Property Trust
UDR--
UDR, Inc.

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