The fate of real estate investment trusts (REITs) looked grim a year ago, but for the moment their fortunes seem to have turned. REIT stocks have gained over 45% since March of this year, recuperating a large proportion of their previous losses. Now, REITs are preparing to invest once more. Over the last 12 months, REITS have raised $12 billion by issuing stocks, preparing to take advantage of even more depressed property values in the future in anticipation of the market’s eventual recovery. For many, REITs are a way for stock market investors to have the profits (or losses) that accompany real estate investment without the hassle of personally taking out a loan and purchasing property.
first tuesday take: The problem with investing in real estate at the moment (which many REITs, raising funds for future investment, may not yet be doing) is that the real estate commercial/industrial/office segments are not near their bottom values in this financial crisis. REITs stockpiling cash for purchases during the eventual bottom by getting the funds now and being ready are as bright as the real estate investors who have been patiently waiting for this coming event by stockpiling cash since 1999, when prices first became distorted beyond fundamentals. Aren ‘t business cycle supposed to deliver like this?
And just when is the eventual bottom going to come for the bottom fishing everyone is hoping to do? This financial crisis will linger longer than a regular business recession, so be patient while waiting for that moment to finally come around. Our best anticipation is now for the 2012 period, when the real estate market will be static after exhausting the speculators of any forward enthusiasm, and seeing the REO inventory through the worst of its problems of clearing them out.
Re: “Here come the real estate vultures”, from CNNMoney.com