A TALE OF TWO MARKETS (revisited):
Courtesy of Dr. Brett of TraderFeed who posted these two charts to his blog last month as a reminder that just like tech stocks were one (key) sector of the markets in 2000 and Internet Stocks the "bubble" portion of Tech (NASDAQ), so as in real estate where housing is only one of several key sectors of the real estate market.
Note that housing stocks, as represented by the HGX (above), started it's decline, as a warning, six months before housing. This was a warning that I first heard from Gary Kaltbaum as indicator on housing.
The REIT index shows, in fact, what I have been saying about the health of the real estate market (ex homebuilders) in most regions of the country. Here are some of those recent posts in support of that:
- California’s commercial real estate markets continue to strengthen.
- Real Estate's Future
- In Some Cities, the Price Is Right For Downtown Office Space
- SOME POSITIVES ABOUT ARIZONA'S REAL ESTATE MARKET
- Commercial Real Estate Outshines Housing Market
- WSJ PROPERTY REPORT: August, 2006
Some real estate stocks are still sizzling:
The housing market may be sagging, but you wouldn't know it from the stellar performance this year of real estate investment trusts. Some of the big winners: Equity Office Properties (EOP) and Vornado Realty Trust (VNO) have both gained 39 percent; Simon Property Group (SPG) is up 26 percent. REIT Mutual funds like Cohen & Steers Realty (CSRSX.) have soared as well.
Most REITs fall into one of two categories -office REITs that own and manage commercial properties and residential REITs that specialize in apartment buildings.
Office REITs are benefiting from the flood of private-equity money bidding up building prices. The impact of private equity has been less pronounced on the apartment side, but there the cooling housing market has actually helped, encouraging more people to rent rather than buy.
The problem is, REIT share prices have been rising faster than earnings. As a result, the rich dividend yields that are REITs' calling cards aren't so rich anymore, with Equity Office Properties and Vornado yielding 3.1 percent and 2.8 percent, down from their ten-year averages of 6.4 percent and 4.8 percent, respectively. The last time Equity Office's yield was this low was early 1998, a year the stock fell 16 percent.
posted by Larry Nusbaum at
6:21 AM
2 Comments:
Larry:
Based on the low yields on the REITS and what you note below would you be buying into U.S. REITS like SPG?
I hear alot of private monies are moving into international REIT's. What do you think of this?
As a result, the rich dividend yields that are REITs' calling cards aren't so rich anymore, with Equity Office Properties and Vornado yielding 3.1 percent and 2.8 percent, down from their ten-year averages of 6.4 percent and 4.8 percent, respectively. The last time Equity Office's yield was this low was early 1998, a year the stock fell 16 percent.
Now, a year after REITs were supposed to crash, I would take money out. I would sell.
I would even think about reducing international REITs. Just don't ask me about the timing because they remain very hot.
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