The biggest challenge for Real Estate Investment Trust (REIT) investors with respect to interest rates is that while bond yields change quickly, changes in real estate fundamentals take time to work through the system. In the S&P 500, real estate is currently the third-highest-yielding sector at 3.5% (28 companies represented), compared with the S&P average of 2.1%. REITs have historically provided steady dividend growth along with capital-appreciation potential. Although there wasn’t much anger and there remains lots of denial as we approach the Fed’s next move, I think they’re getting closer and closer to acceptance.
- All signals suggest that The Federal Reserve will increase rates this week, traders suggest there’s a 90% probability.
- Changes in real estate fundamentals take time.
- The stars have lined up for REIT investors. Rate increases simply suggest that the economy is improving and more REIT tenants should benefit from economic growth.
“All signals suggest that The Federal Reserve will increase rates this week, traders suggest there’s a 90% probability.”
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