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Jim Cramer can't seem to make up his mind on where housing is going. In his email newsletter, author and fund manager Whitney Tilson writes this:I can't figure out what Cramer's saying on housing prices. Today he wrote "Housing-price stabilization isn't in the cards at all," but yesterday he wrote "I am thinking of calling the housing decline over right now on this data. There are very few regions that haven't bottomed."
Cramer's theatrics aside, many investors are looking to buy back into real estate investment trusts (REITs), whose stock prices have been absolutely hammered over the past two years. Even if home prices aren't done falling, the sub-liquidation valuations assigned by the market to many of these companies could make them good investments.
REITs were up 28% in April as bargain-hunters swooped in. And more good news for investors: As REIT prices rise, the secondary offerings they do to raise cash for more acquisitions and balance sheet stability will become less dilutive.
The problem is that many REITs are focused on the commercial sector, where problems may still be in the early stages -- even if residential real estate is close to a bottom. With retailers filing for bankruptcy and closing stores, they may have trouble filling vacancies: It's still not clear who will move into the big boxes vacated by the failures of companies like Circuit City and Steve & Barry's. Here's the main thing to look for in REITs right now, aside from the usual low vacancy rates, solid cash flow, strong balance sheet, good yield, solid properties, good corporate governance, etc.:
The problem is that many REITs are focused on the commercial sector, where problems may still be in the early stages -- even if residential real estate is close to a bottom. With retailers filing for bankruptcy and closing stores, they may have trouble filling vacancies: It's still not clear who will move into the big boxes vacated by the failures of companies like Circuit City and Steve & Barry's. Here's the main thing to look for in REITs right now, aside from the usual low vacancy rates, solid cash flow, strong balance sheet, good yield, solid properties, good corporate governance, etc.:
- If the company is involved in commercial real estate, make sure that it doesn't have short-term debt that will need to be rolled over anytime soon. The commercial lending market remains very tight and even companies whose operations are rolling along nicely can descend into bankruptcy if they can't refinance. Look up General Growth Properties for more on this.
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