REITs recently experienced an average 75% reduction in returns from their property investments. Thanks to the eagerness of stock market investors during this financial crisis, however, REITs have already recuperated much of their lost stock value through cash infusions. REITs with investments in lodging and manufactured homes are among those which have seen the most financial improvement due to the sale of more stock. Publicly traded REITs have a special advantage heading into the future, since they have the ability to raise capital by selling securities to obtain cash. This cash, in turn, positions them for more offensive investments later on. Stock market investors have been eager to assist by investing their cash. Looking forward, not everything is going well for REITs; current investments continue to lose value, as vacancies increase and rentals drop. For the moment, however, the hope of a real estate recovery is enough cause for optimism to induce stock market investors to get back into real estate.
first tuesday take: Looks like the REITs are going for a stock market/commodities market trick of averaging their losses by buying when prices are at half what they paid during the boom. But then that does not make their prior investors any wealthier, until values jump back to the prices paid plus value added to cover inflation/rate of return on the original investment in the REIT. Let’s see… that ought to be sometime around 2025; certainly not during the next boom scheduled for roughly 2016 to 2018 (the Y generation’s effect).
Re: “Trying to gauge the REIT rebound”, from the New York Times