Recovery for REITs?

Relative outperformance by real estate investment trusts is a good harbinger for the sector.

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Real estate investment trusts cratered in 2007, but lately they've been showing some encouraging signs. So far this year, through February 7, REITs are down 0.4 percent, according to the National Association of Real Estate Investment Trusts, or NAREIT. By comparison, the Nasdaq dropped 13.5 percent and the S&P 500 fell 8.8 percent during the same period. This REIT rebound—at least on a relative strength basis—could be a good sign, because, according to the association, "REITs typically precede the direct real estate market on the way down and on the way back up." Over the past year through February 1, REITs plunged 24 percent. Those results are in line with the two most recent downturns, says NAREIT.