Anyone know why REITs are dropping?
 Is there an expectation of future changes in occupancy? Is it because people are bailing out of bonds in anticipation of tax cuts and infrastructure spending which will drive up the deficit and interest rate?
[{"id": "d9w7n8d", "text": "Prob a correlation to the 10-year treasury going up. Cost of capital increases, values decrease.", "replies": [], "depth": 1}, {"id": "d9w9wr8", "text": "REITs are pretty correlated with interest rates. REITs have been declining since August due to    speculation of the fed interest rates. Trump winning further drove interest rate expectations up. \n\nThere are other mitigating/compounding factors depending on the specific property type. Office REITs that serve government and military contracts have gone up, like OFC. Industrial REITs have gone down on risk to international trade, REITs with higher international holdings have been hit worse, like Prologis.\n\nLodging REITs, particularly ones exposed to tourist markets have gone up, due to the weaker dollar effects on tourism.\n\nHealth care REITs have gone down due to the risk of repealing Obama care. NNN REITs have gone down due to the higher interest rate risk.\n\nAnother factor is inflation expectations. Rental rates are sticky due to lease terms, so rents will grow slower than costs, this will lead to NOI declines and either falling values or higher cap rate suppression.", "replies": [{"id": "d9xa8pe", "text": "Excellent response. Just one clarification, though.  Multi family and hospitality can do one thing all the other asset classes can't - MF rents can Mark to Market annually, and hospitality can do it daily, making them better able to adapt to fluctuating inflation and operating/debt costs.", "replies": [], "depth": 2}], "depth": 1}, {"id": "d9wo31y", "text": "Trump is likely to put an end to the Feds funny money printing press. Interest rates, cap rates, discount rates should all increase leading to lower navs/share. ", "replies": [{"id": "da0htvf", "text": "* \"Feds funny money printing press\" = quantitative easing, I assume. That ended in Q3 2014.\n* The President doesn't dictate the policy of the Fed - they're independent.\n* Cap rates and discount rates [don't necessarily rise and fall with interest rates.](http://www.morganstanley.com/articles/connection-between-interest-rates-and-capitalization-rates)\n\nJust a whole lot of bad analysis in your post.", "replies": [{"id": "da0r8bg", "text": "The fed injected $3.8T into the economy, effectively increasing its balance sheet 500% since the beginning of the recession. Surely the effect will last awhile; much more than 2.5 years since its last round of QE. \n \nYes, the Fed is independent... for now. With Trump in office the chances of the Federal Reserve Transparency Act passing has likely increased (Bernie also supports this bill for y'all GOP haters). This act will diminish the fed's independent decision making, leaving room for political influence on monetary policy. \n\nYes, cap rate = risk-free rate + inflation expectation + risk premium... But c'mon, what variable influences most investors? Everyone is yield hungry. Suddenly a 5% cap on a multi-family when it was 7% a few years ago doesn't seem so silly as yields on everything else approach zero. Underwriting has gotten so aggressive that I know RREEF assumes a going-out cap rate 50 bps lower than their going-in rate hoping to make most their return on the reversion. That kind of underwriting is silly. I could argue that investors currently accept too little return for such great risks. When the SHTF discount rates will rise. \n\nInterest rates have nowhere to go but up (unless they go negative, then things are definitely FUBAR)- but many argue they'll increase not as a result of an improving economy but as a political tool. If that's the case, then CRE values will fall. \n\nAnd no, I am not a loon. Janet Yellen herself mentioned CRE values concern her in her latest FOMC. So has Sam Zell. But Barry Sternlicht sees opportunity. Different strokes for different folks.", "replies": [{"id": "da0u6x1", "text": "I think you and I agree on a lot. I wouldn't say what you originally said.", "replies": [{"id": "da0vj6k", "text": "Yeah but that took effort. Hurr'durr economics saves time. ", "replies": [{"id": "da0y0ue", "text": "Haha now I really believe that we agree on a lot.\n\nI've seen some deals still forecasting lower than going in cap rates.  They've got some story tied to them about how the building is repositioned or there's a great new lease.  Maybe that's true, or maybe it's late cycle and guys are getting desperate to justify purchases with juiced returns.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dabp41d", "text": "You have much more in depth analysis below, but I think it boils down to 2 main areas.  1. The Fed is now going to raise interest rates even though they don't think the economy can handle it. 2. All real estate markets run in 7 to 8 year cycles.  Even though it feels like we just go going again, 2008 + 8 years = 2016.  We are right on target for at least a significant pull back in the large markets that may be overheated, investment wise.  The bullish response of the stock market to Trump being elected may cushion the blow for awhile.  I would proceed with caution and buy on at least 10% pullbacks if at all for awhile.", "replies": [], "depth": 1}]