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3 REIT ETFs Could Step Out of Their YTD Slump

This article was originally published on ETFTrends.com.

Real estate investment trusts and sector-related REIT ETFs have been stuck in a rut, but things could change as more traders are looking into the space.

Year-to-date, the Vanguard REIT ETF (VNQ) fell 7.9%, iShares Dow Jones US Real Estate Index Fund (IYR) dropped 6.3% and Schwab US REIT ETF (SCHH) declined 6.8%.

Analysts argued that expectations of a moderate slowdown rather than a hard landing are drawing some investors back, albeit cautiously, the Wall Street Journal reports.

“The tide is turning very slowly. It’s not going to be a sea change,” Jonathan Woloshin, head of Americas equities and real estate at UBS Global Wealth Management’s Chief Investment Office, told the WSJ.

Some REITs have experienced stable demand and healthy debt levels in a stable and growing economic environment with rising job growth.

“REITs are a good indicator of the direction of private market values. But they tend to overdo it on the way up and on the way down,” Marc Halle, managing director at PGIM Real Estate, the real-estate investment unit of Prudential Financial Inc. and head of the Global Real Estate Securities business, told the WSJ.

Analyzing Real Estate Fundamentals

As investors headed into 2018, there has been a view of weakening real estate fundamentals, but first-quarter earnings revealed in line or slightly better than expected results, Thomas Bohjalian, executive vice president at global portfolio manager Cohen & Steers Inc, said.

Among malls and shopping-center REITs, “the bottom didn’t fall out as quickly as some investors believed would occur,” Bohjalian told the WSJ, adding that Cohen & Steers has recently increased its position in some shopping-center REITs.

Investors have taken greater interest in industrial and multifamily sectors, which are enjoying strong demand and tight supply. Fitch Ratings also pointed out that multifamily REITs that have access to financing from government-sponsored enterprises Fannie Mae and Freddie Mac are more stable than other REITs if the availability of mortgage capital is disrupted.

Rising merger and acquisition activity is also adding to hopes of a rebound.

For more information on real estate investment trusts, visit our REITs category.