When will REITs come back to earth?

[soupcxan]

Consider Vanguard's REIT index fund performance:

YTD: +10%
2005: 12%
2004: 31%
2003: 37%
2002: 4%
2001: 12%
2000: 26%

When is this fund going to come back to earth? I want to include it in my asset allocation, but I feel like as soon as I buy it, it will crater...so what to do? Let the dirty market timing begin!

[unclemick]

Hmmmm

Why aren't you looking at sectors/asset classes that have been going down for at least five years - seems to me that's where one should go shopping.

Right?

heh heh heh heh - I sold my REIT index in Jan - as part of giving up my 'legend in my own mind status' and going dumb - Target 2015.

[Arif]

Why aren't you looking at sectors/asset classes that have been going down for at least five years - seems to me that's where one should go shopping

I've been thinking about investing in large caps for that very reason. Something about buy low and sell high.

[wabmester]

The time to buy is when nobody else wants to touch a REIT with a 10-foot pole.*

Just looked at Vanguard's top holding: Simon Property Group (SPG).

They have a market cap of $18B and $14B in debt, so they should be *very* interest rate sensitive.

But they have very fat margins and fantastic YoY earnings growth, so they don't look like they're hurting at all.* *For some reason, their earnings growth is like 10x their revenue growth.* * Sometimes, that's the mark of a company (or industry) that can only grow earnings through cost cutting, but I don't know if that's the case here.

Bottom line: I have no clue, but I'd say wait 3 more years and they'll be cheap again.

[heyyou]

You can risk principle for REIT income at today's prices, but it is not a good investment. Those returns won't repeat, which is what makes REITs so attractive. There is little diversification benefit if their only growth is negative.

[saluki9]

I don't know, considering the Vanguard REIT index is yielding over 100bps less than the treasury MM fund I'd say to hold your $$$

[wabmester]

Originally Posted by saluki9

I don't know, considering the Vanguard REIT index is yielding over 100bps less than the treasury MM fund I'd say to hold your $$$

That's the way I used to view REITs, but I think it might make more sense to compare the yield to TIPS since REITs are backed by real assets. For example, if I owned an apartment building, I'd expect both the asset value to track inflation and for rents to track inflation.

[Delawaredave]

Any International REITs that people like ?

More reasonable valuations ?

[. . . Yrs to Go]

Sold my REITS 1.5-2 years ago. Serves as a reminder why I try not to time the market.

[HFWR]

Originally Posted by Delawaredave

Any International REITs that people like ?

More reasonable valuations ?

I own IGR, which IIRC is about 50-50 USA/Intl. ER 0.76 and div north of 7%, payable monthly. Btw, held in a tax-deferred acct (401k self-directed).

[Cal]

They should come crashing any day now.

This was the last asset class I wanted to add to my mix. I've been waiting for a couple of years and just recently decided to jump in. That should ensure a market correction.

[saluki9]

Originally Posted by wab

That's the way I used to view REITs, but I think it might make more sense to compare the yield to TIPS since REITs are backed by real assets. For example, if I owned an apartment building, I'd expect both the asset value to track inflation and for rents to track inflation.

That is the way I view my actual RE holdings, but not REITs. History has show us that although that is nice in theory, when the economy hits the skids REITs have a tough time signing long term tenants with escalating rents.

With cap rates starting to rise again, I will be looking more at buying buildings and not REITS

[markplus4]

Sold the last of my small REIT holdings into the strength yesterday. Can't see any value in a 6% REIT yield when Money Market offers a safe 5% return. They were good to me in the 1999-2005 time period.