REITS no longer cheap

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
grok87
Posts: 8720
Joined: Tue Feb 27, 2007 9:00 pm

REITS no longer cheap

Post by grok87 » Sat May 25, 2019 9:59 am

According to Greenstreet
https://www.greenstreetadvisors.com/insights/avgpremnav
REITS are now trading at 4% above the NAV of their real estate or at 104%. The long term average is 102%.
I'm not changing my asset allocation but it is something i watch. Mostly i would interpret this as a bullish signal for commercial real estate prices. There is a theory that REITs provide a leading indicator of the market.

I suppose this means i should put more money in the TIAA Real estate fund where i can get in at NAV. But they just raised their expense ratio from 0.79% to 0.83% which concerns me. It's not a big increase but why in the world are they raising expense ratios when everyone else is cutting them!?!

cheers
grok
RIP Mr. Bogle.

Tdubs
Posts: 605
Joined: Tue Apr 24, 2018 7:50 pm

Re: REITS no longer cheap

Post by Tdubs » Sat May 25, 2019 10:12 am

Funny, I was going to post a question about REITs and TREA too. My TIAA 403(b) is closed, but I can buy TREA through a "backdoor," an after-tax retirement annuity.

AerialWombat
Posts: 691
Joined: Tue May 29, 2018 1:07 pm

Re: REITS no longer cheap

Post by AerialWombat » Sat May 25, 2019 10:19 am

(deleted)
Last edited by AerialWombat on Sun Jun 30, 2019 8:53 am, edited 1 time in total.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

Topic Author
grok87
Posts: 8720
Joined: Tue Feb 27, 2007 9:00 pm

Re: REITS no longer cheap

Post by grok87 » Sat May 25, 2019 12:27 pm

Tdubs wrote:
Sat May 25, 2019 10:12 am
Funny, I was going to post a question about REITs and TREA too. My TIAA 403(b) is closed, but I can buy TREA through a "backdoor," an after-tax retirement annuity.
interesting. i wonder if that's why they are raising expense ratios because they are losing 403b business
RIP Mr. Bogle.

HenrySouthernCal
Posts: 45
Joined: Thu Dec 21, 2017 11:33 pm

Re: REITS no longer cheap

Post by HenrySouthernCal » Sat May 25, 2019 3:24 pm

grok87 wrote:
Sat May 25, 2019 9:59 am
According to Greenstreet
https://www.greenstreetadvisors.com/insights/avgpremnav
REITS are now trading at 4% above the NAV of their real estate or at 104%. The long term average is 102%.
I'm not changing my asset allocation but it is something i watch. Mostly i would interpret this as a bullish signal for commercial real estate prices. There is a theory that REITs provide a leading indicator of the market.

I suppose this means i should put more money in the TIAA Real estate fund where i can get in at NAV. But they just raised their expense ratio from 0.79% to 0.83% which concerns me. It's not a big increase but why in the world are they raising expense ratios when everyone else is cutting them!?!

cheers
grok
What I got from other source is REIT is still traded at discount to NAV. I got this:
https://www.lazardassetmanagement.com/d ... 201403.pdf

It said REIT price is still 6% discount to NAV on April 30. VNQ price (my REIT valuation indicator) now went up by slightly under 2% from end of April, so it should still be about 4% discount.

Topic Author
grok87
Posts: 8720
Joined: Tue Feb 27, 2007 9:00 pm

Re: REITS no longer cheap

Post by grok87 » Sat May 25, 2019 4:15 pm

HenrySouthernCal wrote:
Sat May 25, 2019 3:24 pm
grok87 wrote:
Sat May 25, 2019 9:59 am
According to Greenstreet
https://www.greenstreetadvisors.com/insights/avgpremnav
REITS are now trading at 4% above the NAV of their real estate or at 104%. The long term average is 102%.
I'm not changing my asset allocation but it is something i watch. Mostly i would interpret this as a bullish signal for commercial real estate prices. There is a theory that REITs provide a leading indicator of the market.

I suppose this means i should put more money in the TIAA Real estate fund where i can get in at NAV. But they just raised their expense ratio from 0.79% to 0.83% which concerns me. It's not a big increase but why in the world are they raising expense ratios when everyone else is cutting them!?!

cheers
grok
What I got from other source is REIT is still traded at discount to NAV. I got this:
https://www.lazardassetmanagement.com/d ... 201403.pdf

It said REIT price is still 6% discount to NAV on April 30. VNQ price (my REIT valuation indicator) now went up by slightly under 2% from end of April, so it should still be about 4% discount.
thanks for that source. very interesting.
wrote: "While REITs have closed some of the valuation discount to
underlying NAV due to the strong price gains of the past few
months, they are still trading at an approximate 6% discount to
NAV. While narrowed, the current discount continues the sector’s
longest continual valuation below NAV since the financial crisis.
Interestingly, the sustained discounted valuations have now brought
the 10-year average down to a 2% discount as compared to the
longer historical 2%–3% average premium. While private real estate
prices may fall prospectively, the evidence from property sales
5
continues to suggest that prices remain strong across most sectors.
The steadily growing economy, still-low levels of new construction,
lower interest rates, and solid demand for US real estate are
supporting pricing levels. "
RIP Mr. Bogle.

Topic Author
grok87
Posts: 8720
Joined: Tue Feb 27, 2007 9:00 pm

Re: REITS no longer cheap

Post by grok87 » Sat Jun 29, 2019 2:28 pm

THis article in "Pensions & Investments" talks about institutional investors moving into REITs

https://www.pionline.com/print/reits-di ... -investors
"Institutional investors are rediscovering real estate investment trusts as returns and supply-demand dynamics heighten their allure for the first time since the financial crisis.

This year alone, domestic and international asset owners including the $233.9 billion California State Teachers' Retirement System; the €70 billion ($1.13 billion) Bayerische Versorgungskammer, Germany's largest public-sector pension group; and the $897 million Chicago Firemen's Annuity & Benefit Fund added REIT mandates or allocations.

Institutional investors in the U.S. have awarded six REIT mandates so far this year, up from four mandates in all of 2018, said Meredith Despins, Washington-based senior vice president, investment affairs and investor education at Nareit, citing data from Fundmap and Nareit."

Greenstreet still shows REITs trading at a 4.2% premium to the NAV of their real estate holdings. which is basically fair value.

Will be interesting to see if we get back to significant overvaluation of REITs.
RIP Mr. Bogle.

rich126
Posts: 470
Joined: Thu Mar 01, 2018 4:56 pm

Re: REITS no longer cheap

Post by rich126 » Sat Jun 29, 2019 2:35 pm

Not sure if this has any direct effect on reits but some areas of the country seem to be going into another round of construction craziness. Arizona and especially Scottsdale is growing rapidly. Not sure if the jobs are here to support the lofty prices.

User avatar
Sandtrap
Posts: 7530
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: REITS no longer cheap

Post by Sandtrap » Sat Jun 29, 2019 2:40 pm

grok87 wrote:
Sat May 25, 2019 9:59 am
According to Greenstreet
https://www.greenstreetadvisors.com/insights/avgpremnav
REITS are now trading at 4% above the NAV of their real estate or at 104%. The long term average is 102%.
I'm not changing my asset allocation but it is something i watch. Mostly i would interpret this as a bullish signal for commercial real estate prices. There is a theory that REITs provide a leading indicator of the market.

I suppose this means i should put more money in the TIAA Real estate fund where i can get in at NAV. But they just raised their expense ratio from 0.79% to 0.83% which concerns me. It's not a big increase but why in the world are they raising expense ratios when everyone else is cutting them!?!

cheers
grok
I'm not sure how much of this is relevant if the REIT (Vanguard VGSLX) allocation is a long term diversifier in a "Bogle index" portfolio. Beyond that, getting in or out is market timing. (Time in the market vs. . . . )
True?

j
Wiki Bogleheads Wiki: Everything You Need to Know

Topic Author
grok87
Posts: 8720
Joined: Tue Feb 27, 2007 9:00 pm

Re: REITS no longer cheap

Post by grok87 » Sun Jun 30, 2019 7:58 am

Sandtrap wrote:
Sat Jun 29, 2019 2:40 pm
grok87 wrote:
Sat May 25, 2019 9:59 am
According to Greenstreet
https://www.greenstreetadvisors.com/insights/avgpremnav
REITS are now trading at 4% above the NAV of their real estate or at 104%. The long term average is 102%.
I'm not changing my asset allocation but it is something i watch. Mostly i would interpret this as a bullish signal for commercial real estate prices. There is a theory that REITs provide a leading indicator of the market.

I suppose this means i should put more money in the TIAA Real estate fund where i can get in at NAV. But they just raised their expense ratio from 0.79% to 0.83% which concerns me. It's not a big increase but why in the world are they raising expense ratios when everyone else is cutting them!?!

cheers
grok
I'm not sure how much of this is relevant if the REIT (Vanguard VGSLX) allocation is a long term diversifier in a "Bogle index" portfolio. Beyond that, getting in or out is market timing. (Time in the market vs. . . . )
True?

j
Agree. I have a permanent allocation to real estate. But for me the options are reits vs tiaa real estate annuity. If reits start trading at a large premium to nav I may direct new funds into the latter
RIP Mr. Bogle.

User avatar
Sandtrap
Posts: 7530
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: REITS no longer cheap

Post by Sandtrap » Sun Jun 30, 2019 8:01 am

grok87 wrote:
Sun Jun 30, 2019 7:58 am
Sandtrap wrote:
Sat Jun 29, 2019 2:40 pm
grok87 wrote:
Sat May 25, 2019 9:59 am
According to Greenstreet
https://www.greenstreetadvisors.com/insights/avgpremnav
REITS are now trading at 4% above the NAV of their real estate or at 104%. The long term average is 102%.
I'm not changing my asset allocation but it is something i watch. Mostly i would interpret this as a bullish signal for commercial real estate prices. There is a theory that REITs provide a leading indicator of the market.

I suppose this means i should put more money in the TIAA Real estate fund where i can get in at NAV. But they just raised their expense ratio from 0.79% to 0.83% which concerns me. It's not a big increase but why in the world are they raising expense ratios when everyone else is cutting them!?!

cheers
grok
I'm not sure how much of this is relevant if the REIT (Vanguard VGSLX) allocation is a long term diversifier in a "Bogle index" portfolio. Beyond that, getting in or out is market timing. (Time in the market vs. . . . )
True?

j
Agree. I have a permanent allocation to real estate. But for me the options are reits vs tiaa real estate annuity. If reits start trading at a large premium to nav I may direct new funds into the latter
REITs and Real Estate can be strange at times. It can be horrendiously over-valued to the point of being ridiculous, yet, flattens at best but doesn't fall for a very very long time. In fact, it can continue to rise as well.
Strange beasts these things.
j
Wiki Bogleheads Wiki: Everything You Need to Know

User avatar
nedsaid
Posts: 11857
Joined: Fri Nov 23, 2012 12:33 pm

Re: REITS no longer cheap

Post by nedsaid » Sun Jun 30, 2019 10:28 am

grok87 wrote:
Sat Jun 29, 2019 2:28 pm
THis article in "Pensions & Investments" talks about institutional investors moving into REITs

https://www.pionline.com/print/reits-di ... -investors
"Institutional investors are rediscovering real estate investment trusts as returns and supply-demand dynamics heighten their allure for the first time since the financial crisis.

This year alone, domestic and international asset owners including the $233.9 billion California State Teachers' Retirement System; the €70 billion ($1.13 billion) Bayerische Versorgungskammer, Germany's largest public-sector pension group; and the $897 million Chicago Firemen's Annuity & Benefit Fund added REIT mandates or allocations.

Institutional investors in the U.S. have awarded six REIT mandates so far this year, up from four mandates in all of 2018, said Meredith Despins, Washington-based senior vice president, investment affairs and investor education at Nareit, citing data from Fundmap and Nareit."

Greenstreet still shows REITs trading at a 4.2% premium to the NAV of their real estate holdings. which is basically fair value.

Will be interesting to see if we get back to significant overvaluation of REITs.
I took a middle course on REITs, I was concerned about valuations and cut back my stake by 20% about 3 years ago. Larry Swedroe issued warnings that the real returns after inflation for REITs would be about 0.20% a year. I took a lot of criticism, particularly from the people who say that if you wouldn't buy something today that you should sell it. Also took criticism for market timing and for being too concerned about valuations. Others said that my 20% cut in REITs would make little difference long term. I did what I did and so far things have worked out. REITs have actually been performing well and I suspect the Institutional interest mentioned above had a lot to do with it. Haven't bought any more, just keeping what I have with the exception of dividend reinvestment in a Timber REIT.
A fool and his money are good for business.

User avatar
Sandtrap
Posts: 7530
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: REITS no longer cheap

Post by Sandtrap » Sun Jun 30, 2019 10:37 am

nedsaid wrote:
Sun Jun 30, 2019 10:28 am
grok87 wrote:
Sat Jun 29, 2019 2:28 pm
THis article in "Pensions & Investments" talks about institutional investors moving into REITs

https://www.pionline.com/print/reits-di ... -investors
"Institutional investors are rediscovering real estate investment trusts as returns and supply-demand dynamics heighten their allure for the first time since the financial crisis.

This year alone, domestic and international asset owners including the $233.9 billion California State Teachers' Retirement System; the €70 billion ($1.13 billion) Bayerische Versorgungskammer, Germany's largest public-sector pension group; and the $897 million Chicago Firemen's Annuity & Benefit Fund added REIT mandates or allocations.

Institutional investors in the U.S. have awarded six REIT mandates so far this year, up from four mandates in all of 2018, said Meredith Despins, Washington-based senior vice president, investment affairs and investor education at Nareit, citing data from Fundmap and Nareit."

Greenstreet still shows REITs trading at a 4.2% premium to the NAV of their real estate holdings. which is basically fair value.

Will be interesting to see if we get back to significant overvaluation of REITs.
I took a middle course on REITs, I was concerned about valuations and cut back my stake by 20% about 3 years ago. Larry Swedroe issued warnings that the real returns after inflation for REITs would be about 0.20% a year. I took a lot of criticism, particularly from the people who say that if you wouldn't buy something today that you should sell it. Also took criticism for market timing and for being too concerned about valuations. Others said that my 20% cut in REITs would make little difference long term. I did what I did and so far things have worked out. REITs have actually been performing well and I suspect the Institutional interest mentioned above had a lot to do with it. Haven't bought any more, just keeping what I have with the exception of dividend reinvestment in a Timber REIT.
How does this logic make sense?

The REIT industry itself seems to be evolving and reinventing itself exponentially. I hope, in a good way going forward.

Great article and link. Thanks for reposting it.

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

User avatar
nedsaid
Posts: 11857
Joined: Fri Nov 23, 2012 12:33 pm

Re: REITS no longer cheap

Post by nedsaid » Sun Jun 30, 2019 10:48 am

Sandtrap wrote:
Sun Jun 30, 2019 10:37 am
nedsaid wrote:
Sun Jun 30, 2019 10:28 am
grok87 wrote:
Sat Jun 29, 2019 2:28 pm
THis article in "Pensions & Investments" talks about institutional investors moving into REITs

https://www.pionline.com/print/reits-di ... -investors
"Institutional investors are rediscovering real estate investment trusts as returns and supply-demand dynamics heighten their allure for the first time since the financial crisis.

This year alone, domestic and international asset owners including the $233.9 billion California State Teachers' Retirement System; the €70 billion ($1.13 billion) Bayerische Versorgungskammer, Germany's largest public-sector pension group; and the $897 million Chicago Firemen's Annuity & Benefit Fund added REIT mandates or allocations.

Institutional investors in the U.S. have awarded six REIT mandates so far this year, up from four mandates in all of 2018, said Meredith Despins, Washington-based senior vice president, investment affairs and investor education at Nareit, citing data from Fundmap and Nareit."

Greenstreet still shows REITs trading at a 4.2% premium to the NAV of their real estate holdings. which is basically fair value.

Will be interesting to see if we get back to significant overvaluation of REITs.
I took a middle course on REITs, I was concerned about valuations and cut back my stake by 20% about 3 years ago. Larry Swedroe issued warnings that the real returns after inflation for REITs would be about 0.20% a year. I took a lot of criticism, particularly from the people who say that if you wouldn't buy something today that you should sell it. Also took criticism for market timing and for being too concerned about valuations. Others said that my 20% cut in REITs would make little difference long term. I did what I did and so far things have worked out. REITs have actually been performing well and I suspect the Institutional interest mentioned above had a lot to do with it. Haven't bought any more, just keeping what I have with the exception of dividend reinvestment in a Timber REIT.
How does this logic make sense?

The REIT industry itself seems to be evolving and reinventing itself exponentially. I hope, in a good way going forward.

Great article and link. Thanks for reposting it.

j :happy
My view is that there is a middle ground. REITs were pretty expensive and I cut back 20% and decided not to buy more. I kept what remained because I wanted REITs as an inflation hedge and also because I had seen an article that REITs traded at a discount to the underlying real estate prices. Another part of my thinking was that I could be wrong about the future prospects for REITs. As you said above, the industry is evolving and reinventing itself.

Actually I do believe something can be expensive enough that you don't want more but not so expensive that you want to sell it. Lots of folks face this with their own home if they live in a region that has seen real estate prices zoom. It would seem silly to put your home on the market just because you wouldn't buy it at current prices. I am not one of these "all or nothing" thinkers.
A fool and his money are good for business.

am
Posts: 2967
Joined: Sun Sep 30, 2007 9:55 am

Re: REITS no longer cheap

Post by am » Sun Jun 30, 2019 11:44 am

Should long term multi decade investors care? I don’t use them because they’re included in the total market fund and I own a house.

User avatar
JoMoney
Posts: 7132
Joined: Tue Jul 23, 2013 5:31 am

Re: REITS no longer cheap

Post by JoMoney » Sun Jun 30, 2019 11:56 am

I've been playing with the BlackRock tool for modeling their "expected returns" for various asset classes

If you look at the lower bound projections on their error bars, U.S. Real Estate, Long-Term Treasuries, and Emerging Market Equities were the only major asset classes that showed potential negative returns going out even to 25 years.

Definitely a risky play.
Image
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

User avatar
abuss368
Posts: 14051
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: REITS no longer cheap

Post by abuss368 » Sun Jun 30, 2019 12:23 pm

REITs are evolving and spreading across the globe. Many countries now have REITs or close to having them. A year or so ago real estate was carved out of the financial class in the S&P and given its own home. That says a lot.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
abuss368
Posts: 14051
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: REITS no longer cheap

Post by abuss368 » Sun Jun 30, 2019 1:10 pm

am wrote:
Sun Jun 30, 2019 11:44 am
Should long term multi decade investors care? I don’t use them because they’re included in the total market fund and I own a house.
I have heard the House item many times but I never agreed with that strategy. One can not rebalance a house or mortgage.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
abuss368
Posts: 14051
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: REITS no longer cheap

Post by abuss368 » Sun Jun 30, 2019 1:12 pm

JoMoney wrote:
Sun Jun 30, 2019 11:56 am
I've been playing with the BlackRock tool for modeling their "expected returns" for various asset classes

If you look at the lower bound projections on their error bars, U.S. Real Estate, Long-Term Treasuries, and Emerging Market Equities were the only major asset classes that showed potential negative returns going out even to 25 years.

Definitely a risky play.
Image
When I read about REIT folks such as Sam Zell bailing on REITs (never will happen) then I’ll think twice.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
packer16
Posts: 1214
Joined: Sat Jan 04, 2014 2:28 pm

Re: REITS no longer cheap

Post by packer16 » Sun Jun 30, 2019 1:28 pm

The cheapness of REITs is more dependent upon interest rates vs. discount to NAV. If you think interest rates will go the way of Japan and the EU, then real estate is cheap. The cap rates are justifiably below the US given lower interest rates.

The Lazard piece of research has an average FFO yield of 180bp in excess of the BBB bond rate. BBB bonds have declined from 4.7% to 3.6% since the beginning of the year which would correspond to a FFO yields of 6.5% (15.4x FFO multiple) to 5.4% (18.5x FFO multiple) or an increase in value of about 20% since the beginning of the year. Real estate appears fairly valued given current interest rates but cheap if rates continue to decline.

Packer
Buy cheap and something good might happen

Topic Author
grok87
Posts: 8720
Joined: Tue Feb 27, 2007 9:00 pm

Re: REITS no longer cheap

Post by grok87 » Sun Jun 30, 2019 3:32 pm

packer16 wrote:
Sun Jun 30, 2019 1:28 pm
The cheapness of REITs is more dependent upon interest rates vs. discount to NAV. If you think interest rates will go the way of Japan and the EU, then real estate is cheap. The cap rates are justifiably below the US given lower interest rates.

The Lazard piece of research has an average FFO yield of 180bp in excess of the BBB bond rate. BBB bonds have declined from 4.7% to 3.6% since the beginning of the year which would correspond to a FFO yields of 6.5% (15.4x FFO multiple) to 5.4% (18.5x FFO multiple) or an increase in value of about 20% since the beginning of the year. Real estate appears fairly valued given current interest rates but cheap if rates continue to decline.

Packer
interesting perspective.
RIP Mr. Bogle.

VaR
Posts: 588
Joined: Sat Dec 05, 2015 11:27 pm

Re: REITS no longer cheap

Post by VaR » Mon Jul 01, 2019 1:46 am

JoMoney wrote:
Sun Jun 30, 2019 11:56 am
I've been playing with the BlackRock tool for modeling their "expected returns" for various asset classes

If you look at the lower bound projections on their error bars, U.S. Real Estate, Long-Term Treasuries, and Emerging Market Equities were the only major asset classes that showed potential negative returns going out even to 25 years.

Definitely a risky play.
Image
How can Long-Term Treasurys have potential negative 25-year returns?

Does the assertion that REITS are no longer cheap imply that my REIT allocation will hit a rebalancing band soon? By my accounting it still has a ways to go...

lazyday
Posts: 3319
Joined: Wed Mar 14, 2007 10:27 pm

Re: REITS no longer cheap

Post by lazyday » Mon Jul 01, 2019 6:14 am

VaR wrote:
Mon Jul 01, 2019 1:46 am
How can Long-Term Treasurys have potential negative 25-year returns?
Maybe forced buyers, along with long term deflation?

Are any of the bond predictions from places like AQR, Blackrock, GMO, JPM, RA, etc based on good academic research? Or sensible logic?

I do like the equity predictions or commentary from RA, AQR, and GMO. Mostly seems reasonable to me and often based on research.

Early last year I briefly looked into Blackrock’s methodology for predicting equity returns. Their mix included too much future returns = past returns for my taste. I haven’t checked again to see if it changed.

User avatar
grabiner
Advisory Board
Posts: 24584
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: REITS no longer cheap

Post by grabiner » Mon Jul 01, 2019 8:25 pm

abuss368 wrote:
Sun Jun 30, 2019 1:10 pm
am wrote:
Sun Jun 30, 2019 11:44 am
Should long term multi decade investors care? I don’t use them because they’re included in the total market fund and I own a house.
I have heard the House item many times but I never agreed with that strategy. One can not rebalance a house or mortgage.
The more important issue is that the house continues to be worth exactly enough for you to live in it regardless of what happens to its value. Your standard of living doesn't change if real estate prices drop and your only real estate is your home; it does change if REIT prices drop and you are using your REIT portfolio for living expenses.
Wiki David Grabiner

Topic Author
grok87
Posts: 8720
Joined: Tue Feb 27, 2007 9:00 pm

Re: REITS no longer cheap

Post by grok87 » Wed Jul 03, 2019 6:18 am

grabiner wrote:
Mon Jul 01, 2019 8:25 pm
abuss368 wrote:
Sun Jun 30, 2019 1:10 pm
am wrote:
Sun Jun 30, 2019 11:44 am
Should long term multi decade investors care? I don’t use them because they’re included in the total market fund and I own a house.
I have heard the House item many times but I never agreed with that strategy. One can not rebalance a house or mortgage.
The more important issue is that the house continues to be worth exactly enough for you to live in it regardless of what happens to its value. Your standard of living doesn't change if real estate prices drop and your only real estate is your home; it does change if REIT prices drop and you are using your REIT portfolio for living expenses.
this is broadly right but of course in the run up to the financial crisis the popular belief was that folks were using their houses like atms (through cash out refis)
RIP Mr. Bogle.

User avatar
Sandtrap
Posts: 7530
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: REITS no longer cheap

Post by Sandtrap » Wed Jul 03, 2019 8:20 am

grok87 wrote:
Wed Jul 03, 2019 6:18 am
grabiner wrote:
Mon Jul 01, 2019 8:25 pm
abuss368 wrote:
Sun Jun 30, 2019 1:10 pm
am wrote:
Sun Jun 30, 2019 11:44 am
Should long term multi decade investors care? I don’t use them because they’re included in the total market fund and I own a house.
I have heard the House item many times but I never agreed with that strategy. One can not rebalance a house or mortgage.
The more important issue is that the house continues to be worth exactly enough for you to live in it regardless of what happens to its value. Your standard of living doesn't change if real estate prices drop and your only real estate is your home; it does change if REIT prices drop and you are using your REIT portfolio for living expenses.
this is broadly right but of course in the run up to the financial crisis the popular belief was that folks were using their houses like atms (through cash out refis)
Folks still use their home equity like ATM's, seniors in retirement with reverse mortgages, low interest HELOC checkbooks, etc.
The banks and financial institutions make it so easy, so attractive.
Like free money.

j
Wiki Bogleheads Wiki: Everything You Need to Know

User avatar
abuss368
Posts: 14051
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: REITS no longer cheap

Post by abuss368 » Wed Jul 03, 2019 5:47 pm

grok87 wrote:
Wed Jul 03, 2019 6:18 am
grabiner wrote:
Mon Jul 01, 2019 8:25 pm
abuss368 wrote:
Sun Jun 30, 2019 1:10 pm
am wrote:
Sun Jun 30, 2019 11:44 am
Should long term multi decade investors care? I don’t use them because they’re included in the total market fund and I own a house.
I have heard the House item many times but I never agreed with that strategy. One can not rebalance a house or mortgage.
The more important issue is that the house continues to be worth exactly enough for you to live in it regardless of what happens to its value. Your standard of living doesn't change if real estate prices drop and your only real estate is your home; it does change if REIT prices drop and you are using your REIT portfolio for living expenses.
this is broadly right but of course in the run up to the financial crisis the popular belief was that folks were using their houses like atms (through cash out refis)
House as an ATM. Crazy isn't it?
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

Post Reply