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Real Estate ETFs to Avoid in Double Dip


NEW YORK ( TheStreet Ratings) -- The American real estate market is not out of the woods yet. In fact, it has taken a wrong turn slumping back to levels not seen since 2002, according to home prices track in the Standard & Poor's/Case Shiller Index. The resurgent real estate recession gives pause to banking investors and should also worry investors in real estate.

The exchange-traded funds focused on a rise in the value of real estate have been shown to be average to poor performers on a risk-adjusted return basis in our latest ratings. Real estate ETFs to avoid include: iShares Cohen & Steers Realty Majors Index Fund (ICF) rated at D, Direxion Daily Real Estate Bull 3X (DRN) rated at C, iShares FTSE NAREIT Real Estate 50 (FTY) rated at C-, ProShares Ultra Real Estate (URE) rated at E, RMR Real Estate Income Fund (RIF) rated at E, LMP Real Estate Income Fund Inc (RIT) rated at D-, Nuveen Real Estate Inc Fund (JRS) rated at C-, and iShares Dow Jones US Real Estate (IYR) rated at C-.

The real estate investment trusts, or REITs, held by iShares' Cohen & Steer Realty Majors Index Fund include 7.9% Simon Property Group (SPG), 7.6% Equity Residential (EQR), 6.9% Public Storage (PSA),6.7% Vornado Realty Trust (VNO),and 6.4% Boston Properties (BXP).

The tough real estate market in South Florida - ground-zero for the American foreclosure crisis - has pushed property managers into using the latest technology to reach prospective tenants. According to, Butters Realty & Management now features smart-phone readable, 12" high QR codes on their signage to get location specific information to potential commercial real estate customers instantaneously.

Even though the bullishly targeted real estate ETFs are not recommended, the bearish real estate ETFs have performed worse in our ratings as they are generally not suitable as long-term investments. All three funds are ranked in the 'Sell' range for inferior risk-adjusted return with Direxion Daily Real Estate Bear 3X (DRV) rated at E-, ProShares Ultra Short Real Estate (SRS) rated at E-, and ProShares Short Real Estate Fund (REK) rated at D. Stand clear.

-- Reported by Kevin Baker in Jupiter, Fla.

For additional Investment Research check out our Ratings Research Center.

Kevin Baker became the senior financial analyst for TheStreet Ratings upon the August 2006 acquisition of Weiss Ratings by, covering equity and mutual fund ratings. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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