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Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend
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To: Henry D who wrote (2510)4/6/2004 11:23:17 PM
From: Richard Barron  Read Replies (2) of 2561
 
Henry,
<if REITS continue their downtrend, i wonder if it will translate to lower home prices.>

Good question. Too many variables for me to take a shot at it. The key may be in what is causing the REITs to have lower prices.

The apartment REITs are likely the ones most correlated to home ownership.

The correlation of lower apartment rents would require lower mortgage payments to make the jump into ownership.

The correlation of higher interest rates driving down REIT prices would also drive down home prices.
Lower interest rates could help home prices and possibly hurt apartment vacancies simultaneously, as homes would become even more affordable.

Inflation may scare investors to avoid interest sensitive investments, but long term - prolonged inflation will create higher rents and higher home prices when interest rates stabilize.

Lower demand caused by a weaker economy and lower earnings power would hurt REITs prices as well as home prices.

I have no idea how supply and demand of apartments and homes will be effected by just lower REIT prices. If it is just a re-balancing of REIT prices without any change in fundamentals, it should have little impact.

So, as usual, I can bring up many things to be aware of, but am actually no use in predicting the future.

Respectfully,
Richard
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