December 19, 2008
SURVEYING THE DAMAGE (AND OPPORTUNITIES) IN REITLAND
Even by the standards of the great bear market of 2008, REITs have had an especially dreadful year. The Dow Jones Wilshire REIT Index has crumbled by nearly 44% in 2008 through December 18, 2008. The loss exceeds even the dismal performance of the U.S. stock market, which is down about 39% year to date, as of last night's close for the Wilshire 5000.
But as REIT prices have tanked, yields have soared. Equity REITs are yielding over 9% these days on a 12-month trailing basis. That's up from about 3.5% back in November 2006.
Does the hefty trailing yield signal that it's time to start buying? Or do the expected risks still outweigh the potential rewards? For some thoughts on the hazards and opportunities that await real estate investment trusts, we talked earlier today with veteran REIT analyst Barry Vinocur, editor of REIT Zone Publications in Novato, Calif. In our latest episode of Inside View--our new podcasting series--Vinocur takes us on a tour of the battered landscape of publicly traded real estate.
Please visit CapitalSpectator.podbean.com for more options with this and other Inside View podcasts.
Posted by jp at December 19, 2008 5:34 PM
The debt markets need to settle down before there will be any opportunities in REIT stocks. SLG at $25 implies a 9% cap rate. If you can buy the preferred or converts at +13% yield, why would you buy the equity? Unfortunately there are better ways to express a long-term bullishness on real estate right now.
Posted by: paul at December 21, 2008 12:15 PM