How will REITs do in 2024?
With healthy property fundamentals and a favorable interest rate environment, REIT fund managers expect the sector to deliver double digit returns this year.
According to expert panelists at the recent Nareit REITworld annual conference, 2024 could be a year of opportunity for Real Estate Investment Trusts (REITs). They added a note of caution, however, that there are still headwinds affecting investor perspectives on REITs and capital markets in general.
Key 2024 Outlook themes:
Normalization: extreme post-pandemic highs and lows in the property sectors will transition back to historical trend lines and offer more predictable outcomes. Debt in the spotlight: real estate credit strategies will remain in focus amid an elevated interest rate environment.
Summary. REITs have access to capital and are acquiring assets, making it a good time to invest. REITs historically rebound when interest rates pivot and have the potential for rent growth.
REIT 12 Months Forecast
Based on 31 Wall Street analysts offering 12 month price targets to REIT holdings in the last 3 months. The average price target is $28.05 with a high forecast of $31.48 and a low forecast of $24.01. The average price target represents a 13.04% change from the last price of $24.81.
As we dive into 2024, the Fed's accommodative approach to tackling inflation is likely to provide an impetus to the REIT sector, which depends highly on the debt market to carry out business activities. These companies benefit from lower borrowing costs. Moreover, low interest rates contribute to higher valuations.
Thus, between falling interest rates, the coming decline in new deliveries, and attractive relative valuations, REITs appear to be poised for a strong rally over the next few years.
Best Time to Sell Your House for a Higher Price
April, June, and July are the best months to sell your house in California. The median sale price of houses in June 2023, was $796,400, which is expected to grow more in 2024. However, cities like Arcadia and San Mateo follow an upward trend throughout the year.
Yes. This is the best time to buy a house in California. With the current trend in the CA housing market, you'll find better deals on your dream home during Q2 2024. As per Fannie Mae, mortgage rates may drop more in Q2 of 2024 due to economic changes, inflation, and central bank policy adjustments.
Florida Housing Market Predictions for 2024
According to Zillow, as of February 29, 2024, the average home value in Florida stands at $392,306, showing a 3.0% increase over the past year. Homes are moving quickly, with properties typically going pending in around 37 days.
How long should I hold a REIT?
REITs should generally be considered long-term investments
This is especially true if you're planning to invest in non-traded REITs since you won't be able to easily access your money until the REIT lists its shares on a public exchange or liquidates its assets. In many cases, this can take around 10 years to occur.
The value of a REIT is based on the real estate market, so if interest rates increase and the demand for properties goes down as a result, it could lead to lower property values, negatively impacting the value of your investment.
In fact, REIT total returns bounced back with impressive performance in the last quarter of 2023. Based on historical experience, the convergence of the wide valuation gap between public and private real estate will likely ensure continued REIT outperformance into 2024.
According to the National Association of Real Estate Investment Trusts (Nareit), non-traded REITs typically require a minimum investment of $1,000 to $2,500.
How to Qualify as a REIT? To qualify as a REIT, a company must have the bulk of its assets and income connected to real estate investment and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.
All else being equal, higher interest rates tend to decrease the value of properties and increase REIT borrowing costs.
1. Federal Realty: The king. Federal Realty has increased its dividend annually for 54 consecutive years, which it claims (and there's no reason to doubt it) is the longest streak of any publicly traded real estate investment trust (REIT).
Real estate usually performs well in inflationary climates; REITs are the most feasible way to invest. Adding global stocks or bonds to your portfolio also hedges your portfolio against domestic inflationary cycles.
Limited Growth
About 90% of the rental income that the REITs earn from these properties is paid out to the investors as a dividend. A mere 10% is retained and that too, for emergency purposes and administrative expenses. As a result, REITs are generally unable to increase the number of properties which they manage.
REIT investors have an expectation that a REIT's dividends will keep up with inflation. Historically, this has worked well. However, we can't forget, at least for publicly-traded REITs, that they are still traded like stocks. As interest rates rise, they can depress the price of these REITs.
Is REITs good for long term?
They historically offer competitive long-term performance, with consistent returns compared to stocks and bonds. REITs provide attractive income through dividends, liquidity, transparency, and diversification, enhancing risk-adjusted returns.
For each tax year, the REIT must derive: at least 75 percent of its gross income from real property-related sources; and. at least 95 percent of its gross income from real property-related sources, dividends, interest, securities, and certain mineral royalty income.
Key takeaways
Expectations of an earnings rebound in 2024 suggest earnings could continue to drive the market higher. While some valuations are stretched, there is still room for the market to grow if earnings estimates are met.
Wall Street analysts ultimately expect S&P 500 companies to grow earnings by roughly 11% in 2024. And by the fourth quarter, growth is expected to have roughly evened out, with the top 10 stocks expected to see growth of 17.2% while the other 490 companies see growth of 17.8%, according to FactSet data.
1. Positive returns -- but smaller than in 2023. I think that the overall stock market will deliver positive returns in 2024. However, I expect those returns to be somewhat smaller than they were last year.
