Usually there's a low-quality SeekingAlpha post or something, but I haven't been able to find anyone covering the REIT drop. My best-guess is cautionary pulling-out ahead of today's Fed meeting/probable rate hike.
It has been said that the U.S. housing market, particularly in "very hot" areas in the west, is softening YoY. This year, the median sales price for a home in the U.S. has fallen more than it has since the 2008-2011 drop in home prices. It has also been said that the Fed may not raise the rate, and if they don't, it would probably be because of what we're seeing with the housing market, which is hardly a trend, but could be the beginning of a (IMO) mild/moderate pullback as mortgage rates continue to rise and we reach the point at which people cannot really afford housing.
So raising the rate would be bad news for REITs, whose underlying companies have relied heavily on loans to purchase real estate and rent it out for profit. Still, 0.25% is hardly worth a 5% selloff...
My interpretation of this ~5% downward movement this past week or so is that, at this point, morning of the rate hike announcement, the 25bp rate hike is priced in. So I'm inclined to increase my position in VNQ. What's more, if the Fed ends up not raising the rate, I would expect easy money as REITs return to 52H levels (and beyond!).
I know I'm stupid, but am I crazy in my reasoning?
Submitted September 26, 2018 at 05:44AM by jimmyco2008 https://ift.tt/2NJWQST
