U.S. equity REITs are coming off a stellar year with total returns for the sector at nearly 30 percent—double that of the S&P 500. Yet with valuations for many REITs already at pre-recession levels, industry analysts are skeptical that REITs will be able to keep up that pace for much longer.

The National Real Estate Investor tells MHProNews that there is no question that U.S. equity REITs posted some impressive numbers in 2014. According to the FTSE NAREIT U.S. Real Estate Index, all public REITs generated an average return of 27.15 percent in 2014.

To a certain extent, the high tide is raising all boats in the REIT industry. Last year, even the weakest property sectors were up at least 8 or 9 percent. Residential REITs, including both apartment and manufactured homes owners, were clear leaders in 2014.

Manufactured home REITs posted total returns of 46.2 percent, while apartment REITs reported a total return of 40.04 percent, according to FTSE and NAREIT. Both sectors have likely benefited from the still recovering single-family home market. Apartments have seen steady renter demand, and manufactured homes likely received a lift from buyer demand for lower cost manufactured homes.

So far, the positive momentum for the broader REIT sector has carried over into 2015. If many of those same drivers behind 2014 returns—namely, low interest rates, improving demand for real estate and global uncertainty—remain firmly in place, it could very well be another good year for REITs, says Rich Moore, an REIT analyst with RBC Capital Markets. “On the other hand, if we see any slowing in fundamentals, or if interest rates bounce higher, then REITs could start to stall out,” he adds. ##

(Photo Credit: Equity Lifestyle Properties)

 

Article submitted by Sandra Lane to – Daily Business News – MHProNews.