Disclosure: I am in full compliance with all ethics and other policies for Market Realist research analysts. I am not invested in securities that I cover on Market Realist.
Though the week ended Friday, January 8, 2016, wasn’t fruitful for many investors, a few REITs provided some relief to investors in the volatile market.
Healthcare REITs have shown resilience in the rising rate environment. REITs will likely be hurt more in this environment since they have to incur higher expenses.
Consumer spending and the overall health of the economy are the main drivers of retail REITs. The Fed’s decision to increase the interest rate could have a positive or negative impact on spending.
Retail REITs were the top performers of the iShares US Real Estate ETF (IYR) on January 5, 2016, with a return of 2.5%. The healthcare REIT subgroup ended the day with a positive return of 2.4%.
The industry sentiment is divided when it comes to evaluating the impact of the short interest ratio. Many consider it to be an indicator of bearish sentiment.
Industrial REITs are expected to pick up steam as the US economic outlook gradually improves—demand for industrial properties is tied to overall economic growth.
Industrial properties suffered a major setback during the 2008 financial crisis. The vacancy rate for industrial properties increased, and the need for new industrial buildings was close to zero.
For the week ended December 18, the iShares Mortgage Real Estate Capped ETF returned 4%. Resource Capital and New Residential Investment were top performers.
Residential REITs derive their revenue from rentals and apartment sales. Rising rates could increase the borrowing cost for investors. The asset’s value falls.
Mortgage REITs like New Residential Investment, Chimera Investment, and American Capital Agency will witness the impact of a rate hike for the first time.
For the week ending December 11, the iShares US Real Estate ETF, the iShares Mortgage Real Estate Capped, and the SPDR S&P 500 ETF ended on a negative note.
For the week ending November 20, 2015, the iShares US Real Estate ETF and iShares Mortgage Real Estate Capped underperformed the SPDR S&P 500 ETF Trust.
