From Bloomberg: Real Estate's Demise Creates a Graveyard for Fools

The coronavirus has turned property upside down. 

Only the true experts will profit.

By 

John Authers

May 21, 2020, 9:35 PM MST

LINK > https://www.bloomberg.com

Post-Viral Property

Real estate, like education, is one of those dangerous subjects in which everyone thinks they’re an expert. We have all been to school, so we think we know about education, and we all live somewhere, so we think we know about property. As the purchase of our living quarters is the biggest transaction most of us ever make, we tend to have strong views about the market.

First, we have to look at the plunge that has just taken place globally and specifically in the U.S., where listed real estate has had a terrible tumble compared to the market as a whole. For much of the last decade, real estate investment trusts, or REITs, outperformed nicely, thanks to the generous income they pay out from rents compared with the low yields on bonds. That relationship has now broken down, largely because of fears that the second order effect of the lockdowns will see tenants unable to pay rent. Real estate is, ultimately, exposed to the business cycle: (see above) 

Malls have suffered a particularly brutal sell-off, according to Bloomberg’s U.S. REIT indexes, which should surprise nobody. After all, dead shopping malls dot the landscape. Office property is almost at its lowest in a decade, while residential is still relatively robust. The question is what will happen next: