This ETF seeks daily investment results which correspond to twice the inverse of the daily performance of the Dow Jones U.S. Real Estate index. The Down Jones U.S. Real Estate Index offers a broad-based exposure to commercial real estate and is still expensive after two years of housing slaughter.I recognize it is hardly a perfect vehicle to short CRE – its components are some of the most solid companies out there – but unfortunately it is the only broad tool I know of. The holdings in the index are trading at an average P/E of 24 and nearly twice of book.
Check out this article from last month about commercial real estate in New York, which is a healthy market after all. All the big banks have large exposure to commercial real estate, chief amongst them is Lehman Bros. The ratings agencies are late to this fact, just as they were to the problems in subprime and Alt-A.
The only reasons to buy IYR or some other commercial real estate vehicle is if you think the credit crunch and its accompanying writedowns are over.
$114.37 (03/03/08)
