Mortgage Rates Still Low, Good for REITs

Mortgage Rates Still Low, Good for REITs

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Mortgage applications in the U.S. rose last week due to increased demand for refinancing. The pickup in demand is largely due to new lows in interest rates, which are a result of increased demand for U.S. Treasury securities in the wake of Greece exit fears.

The Mortgage Bankers Association said its seasonally adjusted index of refinancing applications rose 13%, but loan requests for home purchases dropped 2.4%, according to CNBC.

The low interest rates are also aiding REITs, and they are able to pay better dividends. Their cost of borrowing is lower, making their business more profitable.

Federal Reserve Chairman Ben Bernanke said that they would buy bonds to drive interest rates lower if the economy needed it. They do not expect interest rates to rise until at least late 2014.

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Borrowing is cheap, and REITs are taking advantage of it. If interest rates are expected to stay low, then they will continue to be more profitable.

Below is a list of residential and diversified REITs that have positive DuPont trends. How long will they see this profitability?

List sorted alphabetically.

Interactive Chart: Use the Compar-O-Matic to compare analyst ratings for the stocks mentioned below:

“1. Apollo Commercial Real Estate Finance, Inc. (ARI, Earnings, Analysts, Financials): Operates as a commercial real estate finance company in the United States. Market cap at $329.41M, most recent closing price at $16.17. MRQ net profit margin at 62.99% vs. 47.35% y/y. MRQ sales/assets at 0.02 vs. 0.012 y/y. MRQ assets/equity at 2.084 vs. 3.065 y/y.

 

“2. ARMOUR Residential REIT, Inc. (ARR, Earnings, Analysts, Financials): Market cap at $1.21B, most recent closing price at $6.85. MRQ net profit margin at 84.76% vs. 75.9% y/y. MRQ sales/assets at 0.006 vs. 0.005 y/y. MRQ assets/equity at 10.616 vs. 10.633 y/y.

 

“3. Avalonbay Communities Inc. (AVB, Earnings, Analysts, Financials): Engages in the development, redevelopment, acquisition, ownership, and operation of multifamily communities in the United States. Market cap at $13.72B, most recent closing price at $143.48. MRQ net profit margin at 22.88% vs. 13.28% y/y. MRQ sales/assets at 0.031 vs. 0.029 y/y. MRQ assets/equity at 1.88 vs. 2.307 y/y.

 

“4. BRE Properties Inc. (BRE, Earnings, Analysts, Financials): Engages in the development, acquisition, and management of multifamily apartment communities in the western United States. Market cap at $3.94B, most recent closing price at $51.27. MRQ net profit margin at 19.62% vs. 14.19% y/y. MRQ sales/assets at 0.029 vs. 0.028 y/y. MRQ assets/equity at 2.045 vs. 2.501 y/y.

 

“5. Equity Residential (EQR, Earnings, Analysts, Financials): Engages in the acquisition, development, and management of multifamily properties in the United States. Market cap at $18.56B, most recent closing price at $61.98. MRQ net profit margin at 27.54% vs. 27.3% y/y. MRQ sales/assets at 0.032 vs. 0.029 y/y. MRQ assets/equity at 2.831 vs. 3.045 y/y.

 

 

(Written by Danny Guttridge)

 

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