In the depths of the decline, REITs fell amid fears that an expanding property meltdown would engulf all kinds of real estate. But as the economy declined, demand for apartments grew rapidly as people chose to rent instead of buy.
Rental income rose steadily, while, at the same time, REITs had the benefit of very low interest rates to fund developments. So profit margins, and payouts to investors, soared.
REITs will still be able to generate income growth from the overall economic expansion, and many view them as "inflation-proof" because the rents they collect can be hiked when costs go up.
But the near-perfect conditions of the past two years for apartments rentals and ultra-low interest rates will not last forever. In addition, as income securities, REITs are priced based on their yields, and if interest rates rise on fixed-income investments, they become relatively less attractive.
The next generation. Skeptics worry that the aging generation of millennials will not be big home buyers anytime soon. They've entered the world in a tough job market and have watched from the sidelines as housing values plunged.
But economic realities could catch up. With so many renting instead of buying, home prices have become relatively attractive. Turner says that last year, in 74 percent of the 50 largest U.S. cities, purchasing a home was cheaper than renting, according to housing data from website Trulia.
Goldman Sachs said in a report that it expects new-household formations to return to their historical annual levels over the next five years, Turner noted. By that time, the children of baby boomers—over 85 million of them—could have saved the money to buy. Especially if they have been living rent-free at home.