REITs Outperformance May Yield to Caution

When it comes to real estate, value continues its reign.

Real estate investment trusts, or REITs, lately have shown their inherent steadiness. "While the third quarter was one of the worst three-month periods for the stock market, REITs exhibited their defensive characteristics and dramatically outperformed most major indices," notes Steve Sakwa, director of REIT research at Merrill Lynch.

In the third quarter, the Morgan Stanley REIT Index's 2.6% decline looks like success compared with the broader market. The S&P 500 lost nearly 15% and the Nasdaq Composite lost 31% in the same period. ...