REITs

Had a Twitter discussion yesterday with a housing reporter about how rising interest rates are causing the Wall Street investors scooping up foreclosed housing for rental, which makes up a lot of purchasing demand in some markets, to pull back. He said that as long as these investors are generating capital through real estate investment trusts, that's the opposite of flight from the space.

Well...

Colony American Homes has postponed a US float as the sudden jump in market interest rates has damped investor appetite for newly issued shares in real estate investment trusts… Bankers have said the recent downturn in shares of publicly traded Reits would hurt valuations for companies in the sector preparing for initial public offerings and secondary share placements…. That pressure has been acutely felt by newly issued shares in Reits with similar business strategies to Colony. Silver Bay Realty Trust has fallen 6 per cent since raising $281m in December, while American Residential Properties has dropped 11.7 per cent since it raised $287.7m from a May float.

We're going to see if this housing recovery is sustainable very quickly... Yves Smith has more.