Interesting counterpoint in Businessweek to those who have become bullish on REITS...
"Historically, the end of many positive real estate cycles has been brought about by a dramatic increase in supply that far outpaced demand. Based on our observations, and the commentary from a number of conference participants, we do not see this type of scenario currently unfolding in the U.S. "
Rising Rates Won't Wreck REITs
Thursday, June 14, 2007
Tuesday, June 12, 2007
Time to Sell REITS?
The so called experts are advising against real estate - again. After pretty much missing the bull market that REITs currently enjoy the experts are now happy to start forecasting the inevitable pullback.
The Morgan Stanley REIT index gained 30% in 2006 compared to 13.6% for the S&P 500 marking the seventh straight year that REITs have outperfomed the stock market.
In the past two weeks about $2B flowed out of real estate mutual funds. This trend combined with the recent increase in the 10 year T-bill to above 5% for the first time in 11 months has some analyst rightly observing that REITs may be cooling off.
Still, the Fed has not raised rates, he has just refused to lower them. I think he his leaving himself some room to harness inflation if he has to later. I also think that after a couple of hundred years of managing the money supply, the US has figured out how to engineer softer landings.
As for local real estate. Look around, job growth is strong, housing is still very strong even though it has softened and the people keep on coming.
This market swing may be a buying opportunity for our local favorite. Highwoods Vice President of Investor Relations, Tabitha Zane said, " I don't think they are negative on Highwoods. I think they're more cautious on REITs in general."
I agree.
Sector Snap: Office REITs Fall - Forbes.com: "Sector Snap: Office REITs Fall"
The Morgan Stanley REIT index gained 30% in 2006 compared to 13.6% for the S&P 500 marking the seventh straight year that REITs have outperfomed the stock market.
In the past two weeks about $2B flowed out of real estate mutual funds. This trend combined with the recent increase in the 10 year T-bill to above 5% for the first time in 11 months has some analyst rightly observing that REITs may be cooling off.
Still, the Fed has not raised rates, he has just refused to lower them. I think he his leaving himself some room to harness inflation if he has to later. I also think that after a couple of hundred years of managing the money supply, the US has figured out how to engineer softer landings.
As for local real estate. Look around, job growth is strong, housing is still very strong even though it has softened and the people keep on coming.
This market swing may be a buying opportunity for our local favorite. Highwoods Vice President of Investor Relations, Tabitha Zane said, " I don't think they are negative on Highwoods. I think they're more cautious on REITs in general."
I agree.
Sector Snap: Office REITs Fall - Forbes.com: "Sector Snap: Office REITs Fall"
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