Despite shrinking returns, REIT popularity grows

New York /
Jul.July 10, 2012 10:00 AM

Though real estate investment trusts’ returns are diminishing, they’re not losing any popularity among investors because so many other investment vehicles are actually in negative yield territory, according to the New York Times.

The latest figures from the National Association of Realtors and CoStar show residential and commercial property prices have gained 7.9 percent and 6.5 percent, respectively, in the last year. As a result, the Vanguard REIT Index returned 2.8 percent in the second quarter and real estate mutual funds returned 3.5 percent.

Meanwhile, the S&P 500 declined 3.3 percent and 10-year Treasuries yield next to nothing. With signs abound that a real estate recovery is on firmer footing, many investors are turning to the sector for profit.

“REITs are getting so much play in the marketplace because they’re a good bond alternative,” said Jeffrey Leventhal, a partner at financial advisory firm HighTower. “More important, they’re a diversifier in a portfolio because they move with bonds instead of stocks.”

However, some analysts warn that the flight to higher yields means REIT shares are no longer priced inexpensively. They have been trading at about a 12 percent premium to net value of assets, well above their historical 3 percent average. [NYT]


Related Articles

arrow_forward_ios
Home sales were the busiest January on record, but still the fifth month of decline in a row. (iStock)
Pending home sales fall for fifth consecutive month
Pending home sales fall for fifth consecutive month
Kohl's investors have a list of changes they want implemented. (Getty)
Activist investors urge Kohl’s to cut real estate, inventory
Activist investors urge Kohl’s to cut real estate, inventory
(iStock/Illustration by Kevin Rebong for The Real Deal)
US warehouse boom attracts foreign investors
US warehouse boom attracts foreign investors
Charles Koch of Koch Real Estate Investments and 2777 South Las Vegas Boulevard (Getty, iStock)
Koch buys Las Vegas casino development
Koch buys Las Vegas casino development
Redfin CEO Glenn Kelman (Photos via Ars Technica, iStock/Photo Illustration by Kevin Rebong for The Real Deal)
Redfin to publish broker commissions on 700K listings
Redfin to publish broker commissions on 700K listings
(iStock)
Pending homes sales dip for fourth straight month, but still break record
Pending homes sales dip for fourth straight month, but still break record
The median existing-home price exceeded $300,000 for the first time last year (iStock)
Vicious cycle creates “huge supply crunch,” pushing home prices up
Vicious cycle creates “huge supply crunch,” pushing home prices up
CoStar's Andy Florance and CoreLogic’s Frank D. Martell (Photos via VCU; Getty; iStock)
CoStar closes in on CoreLogic
CoStar closes in on CoreLogic
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...