Talking heads are saying the housing market hit a new low. And did a double dip. Yet when I look at the charts VNQ is near a new high. Shouldn't VNQ be correlated with the housing market considering its underlying assets are real estates?
There are reasons why residential REITs should rise while the housing market is falling. First, the fewer people buying houses, the more people need to rent, so REITs owning apartment buildings should rise. The reason REITs were down so much today was that the home-building stocks were up. Also, low construction lowers the increase in supply of properties, thus causing a rise in the value of existing properties.