REITs
Property ownership made liquid and divisible. All the exposure of real estate with the price behaviour of a stock.
The invention
The problem. Commercial property was only available to the wealthy, in indivisible chunks.
Congress created the REIT structure to let ordinary investors own income-producing property, requiring most income be distributed. The tradeoff is that you hold a building through a wrapper that trades like an equity — so it falls when equities fall, whatever the building is doing.
Prudential Center, Boston, Massachusetts, skyscraper construction
1964-01-01 · Library of Congress · Public domain
Where it has failed
Not a list of disasters. A pattern library.
- 1974United States
The first REIT crash
Mortgage REITs collapsed with the property downturn; the sector took a decade to recover.
A liquid wrapper on an illiquid asset does not make the asset liquid. It relocates the mismatch.
- 2020Global
Retail and office
Mall and office REITs fell sharply as their tenants' business models were questioned in weeks.
Property income is only as durable as the tenants' industries. Diversification across buildings is not diversification across demand.
Where it stands today
You now have the shape. Here is the reading.
Live from public data, pulled at request time. Read it with the failures above in mind — not because a repeat is due, but because knowing the mechanism is what lets you recognise one early.
Case-Shiller national home price index
S&P Dow Jones Indices via FRED
No data returned
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S&P Dow Jones Indices via FRED
30-year fixed mortgage average
Freddie Mac via FRED
No data returned
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Freddie Mac via FRED
In your ledger
Common in retirement accounts. Behaves like equity in a crisis and like property over a decade, which confuses people in both directions.
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