The bursting of the housing bubble has been devastating for home and property owners who have seen their net worth decrease dramatically over the past two years. In many metropolitan areas, property values are at the same level as in the year 2000. One extreme case, Detroit, is reporting home prices at 1995 levels. Commercial real estate values are also plunging, and it’s becoming more difficult to prevent vacancies and declining rent revenues.

One of the factors that will be a catalyst in the housing market’s recovery is the return of investors to the real estate market. Eventually, prices will sink to a point that speculators will decide the risk of owning property again is worth the potential reward. We’re starting to see signs of that happening, as REIT’s raise cash to take advantage of the deep discounts in the real estate market.

A REIT is a Real Estate Investment Trust. It’s basically a pool of investor money that is used to purchase properties. As the properties appreciate in value and generate revenue in the form of rents, the cash flows are distributed to the shareholders. As you can imagine, owning REIT’s in an investment portfolio has been a roller coaster ride over the past few years. However, REIT’s that are in a strong financial position right now have their pick of valuable properties at major discounts.

Over the past few months, REIT’s have raised more than $12 billion in new money to spend on future projects. They raise money by selling additional shares on the market, as they trade on major stock exchanges. An investor would be attracted to a REIT if they were interested in owning a diversified portfolio of real estate investments but didn’t want to own the properties outright. A REIT gives an investor an easy way to get access to areas of the real estate market even if he or she doesn’t have specific expertise or sufficient funds to select and own properties outright.

Like speculators who are dipping their toes back into the residential real estate market, investors buying shares in REITs might have to be patient before they get the returns that they seek. However, there are values to be had in the real estate market, and those who choose the right areas of the market are eventually likely to be very glad they invested when the market was so depressed.

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Tags: commercial real estate, Real Estate, REITS

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