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Vanguard REIT ETF Message Board

  • crimsonfalcon177 crimsonfalcon177 Jun 3, 2011 3:16 PM Flag

    Can someone explain this to me?

    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?

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    • Perhaps it's that VNQ follows commercial real estate and the housing market is not. Correlations don't always hold.

    • 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.

    • VNQ is only comprised of 16.60% residential REITS. The rest of the portfolio is as follows:

      Specialized REITs 27.40%
      Retail REITs 25.90%
      Office REITs 16.60%
      Diversified REITs 7.60%
      Industrial REITs 5.90%

      So, as you can see the portfolio is very diversified in the REIT sector. Due to this fact no one sector will push or pull it in a single direction.

      Hope this answered your question.

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