FitzColinGerald (47.97)

Real Estate Investment Trusts (REITs): Boon or Bane?

June 09, 2009 – Comments (0) | RELATED TICKERS: PSA , RYN , SPG

In today's real estate market, it is difficult to identify a legitimate "boon." Sure, interest rates are low, but they are artificially low. Bernanke and the Fed have made it a point to drive down interest rates through the "strategic" purchasing of treasuries. Recently, however, the bond market has seen a sharp rise in rates. Whether this increase is a sign of future inflationary fears or a typical market gyration remains to be determined. Whatever the case may be, higher interest rates will stifle any chance of a "speedy" recovery in real estate. Of course, there are a few real estate plays that inevitably stand to gain if interest rates maintain "appropriate levels." Real estate investment trusts (REITs) appear to be the most obvious choice when considering a turnaround in such a market. Homebuilders and banks hold some residual opportunities in a recovering real estate market as well. Yet with the specific structure of REITs for federal income tax purposes, they offer the dividend-savvy investor with a great deal of upside.