By Kevin Grewal, TheStreet

As the residential real-estate market remains volatile and highly dependent on the strength of the labor force, some signs of prosperity have emerged in real estate investment trusts, enabling the iShares Dow Jones US Real Estate (IYR), the iShares Cohen & Steers Realty Major (ICF) and the Vanguard REIT ETF (VNQ) to perform relatively well this year.

One reason these exchange-traded funds have been trending upward is that they offer an opportunity to lend that traditional financing institutions like banks and insurance companies are unwilling to take on.

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Increases in foreclosures, a weak job market and other recessionary factors have put extreme pressure on income-producing properties, leading to increased stress on the loans that these properties support. As a result, an opportunity has arisen for REITs to lend, either through debt or equity financing, to the owners of the income properties.

A second reason these ETFs have been performing well is the relatively low price of real estate. As a result of the financial crisis of 2008, real-estate markets as a whole took a dive, making them cheap and putting the sector in a position destined to go up.

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Finally, the diversification REITs offer to a portfolio adds to their appeal. In general, REITs have relatively low correlations and risk measures compared with equity indexes and give investors a way to mitigate the volatility of the equity markets.

• iShares Dow Jones US Real Estate is up 33.6% over the past year and boasts a yield of 3.56%.
• iShares Cohen & Steers Realty Major has gained 37.3% over the past year, with a yield of 3%.
• Vanguard REIT ETF is up 34.9% over the past year and has a yield of 3.61%.

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