June 7, 2009

REITS: Alternatives To Buying Real Estate

There are a lot of us that would like to participate in the housing recovery, but wont or cant invest large dollars in a home....prices are still declining and if you are wrong you wont be able to get out. Thereby becoming a late stage victim of the housing collapse and feeling especially stupid for having done it. There are alternatives to real estate investments that wont take everything you got and they are liquid.


The traditional method is to use REITS. You might think of these as mutual funds that use real estate investments rather than company stock or bonds as the underlying tradable asset. There are REITS that specialize in apartments or storage or shopping malls, you can pick the sector you think will do best. If you are wrong you can sell. Its a stock market investment, they are as liquid as stocks.

RPX Index

Another method of virtual real estate investment is the RPX index, compiled by radarlogic. A real estate data and analytics company, they created a daily price index of property using the MSA as a basket. What makes Radar Logic interesting is that you can drill down to a single MSA, almost a micro market. REITS are using broad asset classes such as Mortgage REITS or Public Storage, Apartment or even state REITS. But MSA's, now thats quite a narrow slice. If you know your area and have deep convictions, you can make a bet on the direction of price.

The RPX March Index Report:

The report indicates the 25-MSA Composite has stabilized since January 2009, after being in a freefall for much of 2008. The Composite declined only 0.3 percent on a month-over-month basis in both February and March 2009, which compares favorably to the 1.2 percent and 0.9 percent declines in February and March 2008, respectively. The average monthly decline in 2008 was 2 percent. They have a nice chart breakout of the 20 MSA markets. Its a cool way to track real estate by sector and stay on top.

According to RPX, Prices improved on a month-over-month basis in 11 of the 25 MSAs tracked by Radar Logic. In six more MSAs, home prices declined less from February to March than they did from January to February. Buyers returned to California’s housing market en masse in February, attracted by 2001 and 2002 price levels and a fresh supply of foreclosed homes.

What is intriguing about the approach is that you can drill down to your own micro market, what you know best. If your wrong you can sell, quickly. This should improve risk levels and allow people to participate who might not yet be ready to buy in the physical world.

Chart Source: Atlantis Investment Company

Howard Bell


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