As the real estate market shows some signs of prosperity, real estate investment trusts (REITs) have been drawing investor attention and for good reason.
At the commercial real estate level, REITs are attractive because they offer an opportunity to a debt market that banks, insurance companies and other financial institutions are not considering. A weak labor force, declines in consumer spending and other recessionary factors put pressure on income producing properties and increased stress on the loans that these properties supported. In turn, this created an opportunity for REITs to lend to these income property owners.
As for residential REITs, they are drawing attention because of their record low prices. Some investors think that the worst has past for residential real estate and are looking to buy when prices are low. The trends in both commercial and residential REITs have enabled the iShares Dow Jones US Real Estate (IYR) to reap the benefits. The ETF is up 94% over last year to close at $52.67 on Wednesday. Another notable mention is the iShares Cohen & Steers Realty Majors (ICF), which is up over 100% over the last year and closed at $60.67 on Wednesday.
This attractiveness appears to be emerging globally as well. In fact international REITs are drawing even more attention because they earn profits in foreign currencies and are enabling investors a new way to hedge against an instable dollar. As a result, the iShares FTSE/NAREIT Global ex-US (IFGL) has gained nearly 52% over the past year and closed at $29.90 on Wednesday.
When investing in these equities, keep in mind the inherent risks that are involved. A good way to mitigate these risks is through the implementation of an exit strategy which tells investors specific price levels when an upward trend in equities could be coming to an end.
According to the latest data at www.SmartStops.net, an upward trend in the mentioned ETFs could come to an end at the following price points: IYR at $50.23; ICF at $57.73; IFGL at $26.98. These important price triggers change on a daily basis and are reflective of market conditions. Updated data can be found at www.SmartStops.net.