REIT investments

[friendly_jacek]

Everyone knows about the housing market problems. The builders stocks are greatly depressed but REIT is not and correlates highly with equity markets (up to now). I'm aware that the housing weaknes will eventually spill over to equity and REIT will suffer. However, will it be a freefall like the builders stocks?

I'm concerned because my TIAA-CREF has REIT component.

Thanks!

[metalman]

Re: REIT investments

that report by credit suisse (that's posted over on the select section) doesn't say much about reits but does mention this at the back...

Feb 23, 2007: IMH, a large Alt-A residential REIT, said late yesterday that it lost $66.3 million during 2006, attributing losses to a compression of net interest margins."

if reits in alt-a's are already having trouble, that indicates trouble elsewhere?

[jk]

Re: REIT investments

i think there are many different types of reits. i would assume that those which own good properties and have an established income stream will hold up better than equity in general in a sell-off, because of the income.

[Finster]

Re: REIT investments

Everyone knows about the housing market problems. The builders stocks are greatly depressed but REIT is not and correlates highly with equity markets (up to now). I'm aware that the housing weaknes will eventually spill over to equity and REIT will suffer. However, will it be a freefall like the builders stocks?

I'm concerned because my TIAA-CREF has REIT component.

Thanks!

I agree with JK. Not all REITs are alike. Even residential REITs are not closely correlated with the SFH market; they could even benefit as rental demand increases in the wake of mortgage problems.

There may be issues with mortgage REITs, but they make up a small slice of the REIT market, the vast majority being equity REITs.

If you're still concerned, the question isn't whether your TIAA-CREF has a REIT component, but how much of a REIT component. You don't say. It makes a huge difference if you're looking at 5% or 50%.

These caveats aside, the potential issue with REITs has little to do with the highly publicized mortgage and housing market problems. They have run up a lot in price over the past few years and by some measures are overvalued. But we can also say much the same thing about the stock market, and especially the bond market, at large, so it's not so much a REIT issue per se but of financial assets in general. Moreover, longer term I think REITs may still have better potential than the broad stock market because their main underpinning is real assets, and they are likely to have something of a tailwind as inflation becomes more of a concern.

FWIW, I have about 7.2% of my portfolio in real estate securities (mostly REITS), and don't consider that level of exposure in the least unwarranted.

[friendly_jacek]

Re: REIT investments

Thanks you all for these most useful answers.
This forum rocks!

[DemonD]

Re: REIT investments

I think with REITs you want to make sure you are getting something that is going to sustain itself. The biggest problem is that the best REITs have very low yields (like Avalon Bay, retirement living community REIT, and Public Storage). A REIT that invests in medical offices or assisted living would probably be good. One that invested in strip malls probably a bit more dangerous at the current moment.