The One Place Real Estate is Booming

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It’s the second hottest fund category. Who knew that stock investors would fall in love with real estate? In this case, REITs (real estate investment trust) are up more than 7%. The leaders are natural resource funds up 13%.

Leading REIT indexes were down more than 15% last year, so the 7% gain hasn’t recovered the loss yet. But, compared to other real estate markets, this gain isn’t that bad.

Capital markets appear to be stabilizing and that looks like it is driving REITs upward. A REIT is managed, by definition, by professionals so it won’t be as swayed by the investor/speculator type who types the playing field.

“I’d be a fool to say I’m not concerned about the economy and what it means for real estate fundamentals but the group took a big hit last year. If you look at how far it fell, it was probably overdone,” said Robert Gadsden, manager of the Alpine Realty Income and Growth fund in an interview with CNN Money.

Gadsden said that another reason to like REITs right now is because the Fed’s rate cuts have led to lower bond yields and relatively low rates on savings accounts. REITs, however, are required to pay a large chunk of their earnings back to investors as dividends.

“REIT stocks are a good yield play,” Gadsden said.

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