Here's a question for you: REITs dehumanize and perhaps volatilize real estate markets. Do their benefits outweigh their costs? And if so, what are those benefits? Is it legitimate public policy in a system that ostensible has free markets as a principle to suppress or otherwise regulate REITs?
One founder told me that a decent personal investment strategy of his was to be a forever-renter and invest in REITs instead. That way you get the financial upside of homeownership but more diversification instead of having all your equity locked up in a single asset. It sort fits the changing profile of this generation, which is more mobile and doesn't want to own cars or huge assets.
On the other side, while I personally don't know enough about the behavior of REITs across the entire country, I can tell you that Sam Zell's Equity Residential is causing huge problems for the Latino and black community of East Palo Alto, which is adjacent to the Facebook campus. They're getting hundreds of eviction notices per month, which the community lawyers have to fight off.
Benefit: REITs commoditize the real estate market. If you're just a regular joe and you want to invest in stock or gold or pork bellies, a reasonably small investment is enough to get you started. Trying to buy into real estate is nigh impossible, though, unless you pool money because the "unit" price is so high.
Umm Pork Bellies would be nearly impossible to invest in for an average investor even before they stopped being exchange traded commodities. The margin requirements alone are on the order of real estate investments, not to mention the contract prices.
Well, it's hard to find exact numbers now, but with a daily price limit of 0.03 on a contract of 40000, that's $1200. Figure double for initial margin.
I mean, even if you were to take delivery (!!!), pork bellies traded for less than $1 per pound, so you could buy it outright for less than many real estate deals.
