Strong Employment Causes A Fall in REIT Market
From the Desk of Jim Eccleston at Eccleston Law Offices:
A recent Labor Department report showing the biggest job gain in 17 years has triggered a fall in the U.S. real estate investment market since September. The reason is speculation that the Federal Reserve will boost interest rates in the first half of this year.
Last week, the 166-company Bloomberg REIT index fell 2.8%, the biggest drop since Sept. 12th. The 10-year Treasury yield rose to 1.96% from 1.82%.
Single-tenant buildings and health-care real estate led the decline. Those properties tend to be viewed as bond-like investments because they typically have tenants with long leases. Rising rates make it more expensive for REITs to borrow money, which may hurt their ability to buy property and develop real estate. Higher Treasury yields also reduce the appeal of the stocks' dividend yields.
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Tags: REITs, Labor Department, Bloomberg, Eccleston Law