When Will REITs Recover?

seekingalpha05-22

REITs have been in a bear market for 2 years now.I think that the recovery could take place in the near term.There are two strong catalysts that could push many REITs 50% higher. Adam Gault This is ...

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Adam Gault This is ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694546-when-will-reits-recover\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>When Will REITs Recover?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhen Will REITs Recover?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-22 19:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694546-when-will-reits-recover><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>REITs have been in a bear market for 2 years now.I think that the recovery could take place in the near term.There are two strong catalysts that could push many REITs 50% higher.   Adam Gault This is ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694546-when-will-reits-recover\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4694546-when-will-reits-recover","article_id":"2437269364","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/88621476/image_88621476.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2437269364","pubTimestamp":1716377400,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"REITs have been in a bear market for 2 years now.I think that the recovery could take place in the near term.There are two strong catalysts that could push many REITs 50% higher.   Adam Gault This is a question that I often get from my readers:  \"When exactly will REITs recover?but this has now been achieved and therefore, these high interest rates are not needed anymore. They are putting needless restrictions on the economy and will result in very high interest expense to the government unless they are cut. Today, despite all the reports of \"sticky inflation\", the actual inflation is just 2.4% according to Truflation, which uses real-time data. Why is the headline rate then so much higher at 3.4%?","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","BK4588":"碎股","CFA":"VictoryShares US 500 Volatility Wtd ETF","MAA":"MAA房产信托","VNQ":"不动产信托指数ETF-Vanguard","CFA.SI":"NikkoAM-STC Asia REIT","BK4215":"住宅房地产投资信托"},"translate_title":"房地产投资信托基金何时复苏？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CFA":1,"CFA.SI":1,"MAA":1,"VNQ":1},"content_text":"REITs have been in a bear market for 2 years now.I think that the recovery could take place in the near term.There are two strong catalysts that could push many REITs 50% higher.   Adam Gault This is a question that I often get from my readers:  \"When exactly will REITs recover?\"  And I get why. Real estate investment trusts (\"REITs\") (VNQ) have now been in a 2-year-long bear market, and we are all getting a bit impatient, including myself: Data by YCharts But unfortunately, there is no easy answer here. I wish I had a crystal ball that could predict the future, but no one can time the market, and I am no exception. The market can be incredibly unpredictable over the short run, and this 2-year long bear market is proof of that. But if you put a gun to my head and forced me to make a prediction, then I would say that REITs are likely to experience an epic recovery in 2025 because of two key reasons: the drop in interest rates and the anticipated acceleration in rent growth. I believe that the combination of these two factors could fuel an epic rally, with many individual REITs rising by over 50% in the near term. Let’s dive in. The Drop in Interest Rates Firstly, let me clarify that I don’t pretend to know exactly when interest rates will return to lower levels. However, I am quite confident that interest rates will be cut sometime in the next year and here's why: Interest rates were hiked at an unprecedented pace to the highest level in a decade to get the high inflation back under control… but this has now been achieved and therefore, these high interest rates are not needed anymore. They are putting needless restrictions on the economy and will result in very high interest expense to the government unless they are cut. Today, despite all the reports of \"sticky inflation\", the actual inflation is just 2.4% according to Truflation, which uses real-time data. Why is the headline rate then so much higher at 3.4%? There is one main reason: shelter makes up a huge component of the index at 36%, and the way they calculate it is lagging. In last month’s CPI report, they had shelter inflation at 5.5%. But anyone who closely follows the residential market will tell you that this is way off. Today, the apartment market is oversupplied, with rents stagnating or even slightly dropping in most cases. Mid-America Apartment Communities (MAA), which is one of the biggest apartment REITs in the U.S., has guided for a 1% lower same-property NOI in 2024. If you simply corrected the shelter data in the headline inflation, then it would drop to near 2% and this is why I think that it is likely that we will see rate cuts in the near term. I am not alone in thinking so, as the debt market is pricing a 90% chance of interest rates being cut already this year and a 99% chance within a year from now. The most likely probability is that interest rates will a full 100 basis points lower in June 2025: FedWatch   BSR REIT This is a huge deal for REITs because they collapsed due to rising rates, and therefore, we think that declining rates should have the opposite effect. The surge in rates drove a lot of capital away from REITs as income investors were suddenly able to earn a decent yield from money market funds and treasuries. But as rates are cut, the narrative could change rapidly, and investors will rush back to REITs to secure their higher and growing yields. The Acceleration in Rent Growth The second catalyst is that rent growth should accelerate in 2025 in many property sectors, and particularly so in the apartment and industrial property sectors, which are today facing some oversupply. Apartment and Industrial REITs are particularly cheap right now because of this reason. A lot of them are down nearly 50% since 2022 even despite growing their cash flows by another 10-20% since then: But the high interest rates have had one indirect benefit for these REITs. It has put most new development projects on halt and as a result, the growth in supply should drop very significantly in 2025, resulting in faster rent growth. The CEO of BSR REIT, an apartment REIT said this on their most recent conference call: [emphasis added]  \"We fully expect that 2024 will be the peak year for apartment deliveries. The pace of development slowed sharply last year due to the impact of rising interest rates on developers. The pipeline of new supply is very thin beyond this year. And with migration into our markets continuing, we expect new supply to be absorbed by early 2025. We therefore believe that 2025, 2026, 2027 and beyond will be significantly stronger years for our rental markets. I would now like to review our guidance for 2024, which we updated yesterday.\"  This bodes very well for these REITs. The oversupply is only temporary and should turn into undersupply already in the near term. Closing Note Lower interest rates coupled with faster rent growth is a powerful catalyst for REITs, and it should play out next year already. Even then, REITs are still priced at their lowest valuations since the great financial crisis because most investors are so incredibly short-sighted.  For these reasons, I will keep accumulating more REITs at these discounted levels.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.0","shortVersion":"4.24.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2437269364"}