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Thursday, August 28, 2008
Exports Boost Economy in 2Q
Associated Press
WASHINGTON--The economy shifted to a higher gear in the spring, growing at its fastest pace in nearly a year as foreign buyers snapped up U.S. exports and tax rebates spurred shoppers at home.
The Commerce Department reported Thursday that gross domestic product, or GDP, increased at a 3.3% annual rate in the April-June quarter. The revised reading was much better than the government's initial estimate of a 1.9% pace and exceeded economists' expectations for a 2.7% growth rate.
The rebound comes after two dismal quarters. The economy actually shrank in the final three months of 2007 and limped into the first quarter at a feeble 0.9% pace. The 3.3% growth in the spring was the best performance since the third quarter of last year, when the economy was chugging along at a brisk 4.8% pace.
Still, the growth pickup is not likely to be seen as a lasting sign that the fragile economy is back on solid ground.
Federal Reserve Chairman Ben Bernanke recently warned the economy will be weak through the rest of this year. A growing number of analysts fear that the country will hit another economic pothole in the fourth quarter, as the bracing impact of the tax rebates disappears. And there are concerns exports could tail off as other countries' economies slow down.
GDP measures the value of all goods and services produced within the U.S. and is the best barometer of the country's economic health.
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Not everyone has the financial ability to own and rent out multiple houses for extra income. And even fewer people want to deal with late night calls from tenants crying about their broken oil burner. Well, thanks to real estate investment trusts, or REITs, you don't have to deal with the stresses of being a landlord to make money off of the real estate market.
A REIT is any entity that pools money from a group of investors to buy different kinds of real estate or real-estate-related assets, such as buildings or mortgages on buildings. It uses the income from rent and loan interest to pay out a steady monthly dividend to its investors.
There are three types of REITs. The most common one is an equity REIT, which simply buys buildings and generates revenue from the rent it charges. Mortgage REITs loan out money to owners of real estate for mortgages or buy existing mortgages to collect interest, which is then paid out to the REIT's investors. Finally, there are hybrid REITs, which are a combination of mortgage and equity REITs.
REITs can be public or private. Public REITs are bought and sold just like stocks and are listed on exchanges, while private REITs can only be bought through direct-participation programs. With private REITs, the investors are actually part owners of the real estate rather than just shareholders of the REIT corporation. They can't sell shares and they typically have to keep their money tied up for eight to 12 years. However, there's the benefit of less volatility since the market can influence public REITs.
One potential drawback to REITs is how they are taxed. While qualifying equity dividends are normally subject to only a maximum of 15%, the dividends from REITs are taxed as regular income, which could be much higher -- depending on how much money you make.
