After many days of serious selling pressure, real estate investment trusts (REITs) found eager and willing buyers on Sept. 28.
Several of the major REITs gained in price by 3% or more, a significant upward move considering the recent downswings. Whether the overall trend lower remains in place is a concern for investors.
As the Vanguard Real Estate ETF (ARCA:VNQ) is down roughly 31% year-to-date, real estate investment trusts are being beaten down as the sector continues to decline.
Almost every sub-sector of REITs has been hit hard in 2022 as inflation and recession worries have taken their toll on markets.
Hotel REITs have been one of the worst REIT performers during this time. Many in the group are down 40% or more and several of these hotel REITs have recently touched 52-week lows.
The effects of rising interest rates continue to hit markets and none more so than in the mortgage sector. The amount of selling lately, for example, in Annaly Capital Management Inc. (NYSE: NLY) is remarkable for its extraordinary downward pressure on price levels.
National Storage Affiliates Trust (NYSE: NSA) is a self-storage REIT that owns, operates and acquires 1076 self-storage properties in the largest metropolitan areas throughout 42 states and Puerto Rico.
As the national average for the 30-year fixed mortgage rate sits at roughly 6.43%, many homebuyers can no longer afford a down payment as well as the interest rate that comes with purchasing a home. Unfortunately, due to the scorching hot real estate market, the average home price in the U.S. is roughly $356,054, causing rents to surge by 12.3%, at the end of August.
Although interest rates are rising, it doesn't mean savvy investors cannot earn positive returns on real estate investment trusts (REITs). Historically, when the risk-free rate rose dramatically in six time periods, REITs earned positive returns during four of those periods, and out of half of those periods, they beat the S&P 500.
As we head into the November midterm elections, states such as Maryland, Missouri, Arkansas, North Dakota and South Dakota are preparing to vote on the legalization of recreational marijuana.