Real estate investment trusts have been very much in the news lately, with FINRA putting non-traded REITs on their radar. But Brad Case, economist with the National Association of Real Estate Investment Trusts, says there are some misconceptions about the real estate investment vehicles, especially publicly-traded REITs, which are not under regulatory scrutiny. Case sat down with Registered Rep. recently to clear up some of those misconceptions.
One thing Case cleared up is the relationship between publicly traded real estate and private real estate. Few people realize how great the lead-lag is between the them. Publicly traded REITs are like stocks, so investors are betting on what they believe will happen in the market in the coming months. But values of private real estate investments lag those in the public market because most of these properties’ values are based on appraisals, which may only occur every three years, Case said.
The graphic shows how publicly traded real estate leads the private real estate market into downturns and into recoveries.