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Real estate has been a strong asset class as of late, but investors are growing fearful of the tentative rate hike in December and its impact on REITs.
CenterSquare chief investment strategist Scott Crowe said REITs are known to underperform coming into a Fed hike, but they outperform on the other side of a rate hike, Investopedia reports. “Higher rates are bad for REITs, but what that assumption misses is that the rate that matters for REITs is long-term bond yields, because that represents the cost of debt for real estate deals. The Fed doesn't set long-term rates.”
Because REITs are ultimately tied to long-term rates, Crowe says the fear that a Fed rate hike will devastate the sector is largely unjustified. Just the same, he is convinced the Fed will raise rates come December, but unlike other investors he isn’t worried about it. [Investopedia]
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