As the economy recovers, investors and lenders alike have been eagerly pouring money back into real estate. The capital markets, however, remain a fickle place. Recent events prove yet again that the field is best served by those who really understand it.
In May, the 10-year Treasury began increasing amid worries about the Federal Reserve’s plan to cut back its bond investment program. Then in June, comments by Fed chairman Ben Bernanke prompted an uptick in interest rates, even though the federal funds rate remained untouched.
None of these increases have been significant in a historical context, but these days even a hint of higher rates stirs panic. Moreover, the broader investment market tends to equate real estate with bonds and higher interest rates with lower yields, as the National Association of Real Estate Investment Trusts recently reported. As a result, REIT stocks have underperformed other indices of late: the FTSE NAREIT U.S. REIT Index posted a total return of 0.83 percent in July, versus 5.09 percent for the S&P 500 and 6.56 percent for the NASDAQ Composite, NAREIT noted.
Read more...The Fickle Market | Commercial Property Executive