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With Rising U.S. Rates, Where Should Real Estate Investors Go Now?

Eric Dutram

To start the year, U.S. real estate ETFs like IYR and VNQ have been on a serious slump and are now doing no better than the market at large from a year-to-date look.

This is surprising considering that these funds had built up a sizable lead earlier in the year, and had posted double digit percentage gains through the first half of 2016. However, the interest rate story soon changed and hit this space—along with other rate sensitive segments—pretty hard as of late, as it now appears that the Fed could raise rates again to close out the year.

What is a real estate investor to do in this environment?

Well, for this edition of the Dutram Report, I talked to Jamie Anderson of Tierra Funds about this problem, as well as the outlook for rates and its impact on real estate in the near term. We also discuss the global real estate world and where some values might be appearing in that particular market.

Additionally, Jamie and I also talked about his company’s fund, the TierraXP Latin America Real Estate ETF (LARE), and what sets it apart in this type of environment. The fund has managed to prosper in this difficult rate situation, but that could be due to key countries, like Brazil, lowering their rates instead of raising them right now. This is arguably akin to what the Fed here did for REITs here several years ago, potentially suggesting that a promising situation is developing for LARE right now too.

But as many investors know, the world of Latin America investing can be volatile, and there are several options in this market already, such as the iShares MSCI Mexico ETF (EWW) and the iShares MSCI Brazil ETF (EWZ). I make sure to find out what sets LARE apart from these, and why investors should give this fund a closer look if they are looking for real estate exposure in this uncertain time.

No matter your outlook for the rate situation here in the U.S., the discussion should be a real eye-opener for investors who have real estate holdings, while it should offer up a fresh perspective on what is going on in foreign markets as well. Make sure to check out this edition of the Dutram Report for insights on these topics and more, and check out the other great Zacks podcasts as well!

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VIPERS-REIT (VNQ): ETF Research Reports
ISHARS-BRAZIL (EWZ): ETF Research Reports
TIERRAXP LA RE (LARE): ETF Research Reports
ISHARS-MEXICO (EWW): ETF Research Reports
ISHARS-US REAL (IYR): ETF Research Reports
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