Folks investing in real estate-related securities over the past few years have generally done quite well. As a Wall Street Journal article reported: "The stocks of REITs, companies owning real estate or mortgages that must pay out at least 90% of their taxable income in the form of dividends, delivered total returns (stock-price appreciation plus dividends) of 41% in 2004, up from nearly 37% in 2003." Roughly doubling the overall stock market's performance in 2005, REITs have beaten the market for six years running.
In addition, investors are pumping money into real estate mutual funds, which also have fared well lately. Recently, in The New York Times, Vivian Marino reviewed this phenomenon: "Real estate funds returned an average of 11.9%, according to Morningstar, after climbing 32% in 2004 and 37% in 2003. For the five years through December, the annualized gain was 18.56%. By contrast, including dividends, the Standard & Poor's 500-stock index returned 4.9% last year and 2.7%, annualized, over the five-year stretch."
The big question is: Will this kind of outperformance continue in 2006? Despite what anyone may tell you, no one knows. That's why it's always good to never put all of your eggs in one basket. Many said that 2005 wouldn't be good for real estate, and it was good. Some say that 2006 will be good, and perhaps it won't be.
Here's a possibility: Consider investing in some actual real estate, if you haven't already done so. If you're renting your home, give some thought to buying one. You can learn all about how to buy or sell a home by visiting our Home Center, which features lots of money-saving tips and even some special mortgage rates.
You might also want to check out these articles:
- Buying a House Is Easy!
- So You Want to Be a Landlord?
- Make Money as a Landlord
- A Mover's Survival Kit
- 10 Things to Know About Mortgages
- 10 Home Enhancement Tips
By the way, our Champion Funds newsletter hasn't ignored the real estate trend. Shannon Zimmerman's newsletter service has recommended several real estate funds that have done quite well. In only about four months, the T. Rowe Price Real Estate fund
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.