Real estate funds have been a bit stinky for most of 2017 with hops and drops here and there. Perhaps today is just a value play on a sector that has been down. The up pricing is not related to a big move in investment grade bond yields. The below %'s have held from the opening.......will check the finish later today.
Our holding in this area is FRIFX. This fund is not a rocket up or down relative to other RE funds; as the fund is a 50/50 equity/bond mix; a unique fund in the sector.
FREL = + 1.3%
IYR = + 1.1%
RWR = +.8%
VNQ = + .6%
Comments
As I noted, the fund isn't high on the category list at M* against equity style RE funds; and just kinda chugs along with a decent yield and cap. gains. The fund did take about a -32% hit during the market melt.
I suppose the fund for our house, is our toe in real estate (about 10% of our portfolio) that many would consider the "chicken" side of investing in this area. I have not checked, but presume our "real estate" equity among other broad based funds adds another few percentage points of exposure to this sector.
Composition:
https://fundresearch.fidelity.com/mutual-funds/composition/316389865?type=sq-NavBar
Chart from Sept. 2004 to date:
http://stockcharts.com/freecharts/perf.php?FRIFX,IYR,RWR,VNQ,PETDX&n=3296&O=011000
Regards,
Ted
Already have enough other international exposure and don't care to play int'l. with real estate as a sector.
Regards,
Ted
The draft says that a reduced ($500K) mortgage deduction cap applies to all mortgages originating after Nov. 2. That means that people currently buying $500K+ homes are facing a risk that this change passes and their mortgage isn't as deductible as they had planned.
The mere existence of that possibility should soften demand for higher priced homes. While there's been a lot written about possible impact in the future, I'm wondering about current impact, because unlike most tax provisions, this one would apply retroactively to Nov 2.
Yes, the Nov.2 date you noted was part of what stuck in my mind when I saw the big bump up in real estate Monday morning (having scanned through the bill in a hasty fashion.....the mortgage area was in the back of my mind, too). This being part of the subject line (the legislation) for this post, as I found nothing else to trigger a big, single day move in U.S. real estate investments. It appears that the real kicker is the proposal below:
Well, perhaps this is/was the kick for real estate.....text indicates holding period changes related to several areas, including real estate partnerships.
https://www.cnbc.com/2017/11/06/top-house-tax-writer-kevin-brady-we-will-put-in-the-two-year-holding-period-on-carried-interest.html
---Multiple links related to Brady and real estate partnerships holding periods. Redundant, of course; but you may find one of interest
https://www.google.com/search?q=kevin+brady+real+estate+partnership+holding+period&oq=kevin+brady+real+estate+partnership+holding+period&aqs=chrome..69i57.25686j0j8&sourceid=chrome&ie=UTF-8
'Course, all of this is tentative, yes? So, what the proposed changes "gave" to real estate for one day may also quickly disappear. A traders delight.....of which, I am not.
I also agree with others here that changes in deductibility of mortgage interest would affect values.
These funds vary quite a bit in their approaches. Helps explain why different funds’ returns vary widely over short periods. A given fund may hold office buildings, malls, self-storage facilities, apartment complexes, hotel chains and mobile home park operations - to name a few. I wouldn’t be surprised if some even held mortgage companies and the like for diversity. Don’t have any strong sense about where values will go next. I don’t mind holding a little for diversity. But these funds are very cyclical and subject to pretty substantial trends both on the way up and on the way down.
FWIW - T. Rowe considers real estate a “hard asset” and incorporates a substantial amount in their Real Assets fund (PRAFX).
Are real estate funds a bargain? Don’t know about that. Not seeing anything that looks terribly beaten up out there.
Sure wasn't tied to interest rates at this time.