Are REITs a good hedge against a stock market crash?

Not in the four big selloffs since 2008. A broad REIT fund (VNQ) fell further than the S&P 500 in 2008 (-72% against -56%), 2020 (-42% against -34%) and 2022 (-33% against -25%), and less only in the late-2018 selloff. They are stocks, and in a crash they have behaved like riskier ones.

Why did REITs fall so much in 2022?

Interest rates rose at the fastest pace in decades. REITs borrow heavily, so their costs rose, and their income looked less attractive next to suddenly higher bond yields. Rate-sensitive assets of all kinds, including utilities and bonds, fell together that year.

Are REITs a good hedge against inflation?

Over long periods, rents and property values have tended to rise with prices, which is the case for REITs as an inflation hedge. Over short periods it has not worked reliably: in 2022, with US inflation near a 40-year high, REITs fell sharply because the interest rates that come with inflation hit them first.

How much of a portfolio should be in REITs?

There is no rule. Many portfolios hold none beyond the few percent already inside a total-market fund, some lazy portfolios add 5% to 10%, and a few hold 20%. The right amount depends on what the slice is for, your taxes, and how much property you already own, including your home. Backtesting your own mix with and without REITs shows the trade-off.

Is a REIT fund the same as owning rental property?

No. A REIT fund is spread across thousands of properties of many types, is managed for you, and can be sold in seconds, but its price moves every day with the stock market. A rental property is concentrated in one place, takes work, uses a mortgage, and is hard to sell quickly, but its value is not marked to market daily, which can make it feel steadier than it is.

Should You Own REITs? What Real Estate Funds Did in Every Crash Since 2008

7 min read · Updated 2026-10-27

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Real estate investment trusts, or REITs, let you own a slice of office towers, apartments, warehouses, cell towers and data centers through a fund you can buy like any stock. They are often added to a portfolio for two reasons: a higher income than most stocks, and the hope that property moves differently from the rest of the market.

This guide checks the second reason against the record. It looks at what a broad REIT fund did, by price, in each stock market crash since 2008 compared with the S&P 500, why interest rates matter so much to REITs, how their income is taxed, and how investors who hold them decide how much. Educational, not a recommendation.

Stress-test a portfolio with REITs →

What a REIT is

A REIT is a company that owns, and usually operates, income-producing property. In the US, a REIT must pay out at least 90% of its taxable income to shareholders each year, which is why REIT yields tend to be higher than those of other stocks. In exchange, the company pays little or no corporate income tax.

A REIT fund such as VNQ holds a basket of them, and modern REIT indexes are broader than the name "real estate" suggests: alongside apartments, offices and shopping centers they hold warehouses, cell towers, data centers and health care buildings. They are still stocks, though, traded every day on an exchange, and that turns out to matter more in a crash than the buildings underneath.

What REITs did in every crash since 2008

The Vanguard Real Estate ETF (VNQ) has traded since 2004, which covers four big stock market selloffs. Over the months the S&P 500 fell from its peak to its bottom in each one, here is how REIT prices moved.

In the 2008 financial crisis the S&P 500 fell about 56% and REITs fell about 72%, much further, as the credit freeze hit borrowers and property values at once. In the late-2018 selloff REITs held up better, falling about 13% to the market's 20%. In the 2020 COVID crash they fell about 42% against about 34%, with offices, hotels and malls suddenly empty. And in the 2022 bear market they fell about 33% against about 25%.

So REITs fell further than the stock market in three of the four crashes. Whatever role they play in a portfolio, crash protection has not been it.

Price change during each stock market crash: S&P 500 vs REITs (percent)

2008 financial crisis: S&P 500

−56%

2008 financial crisis: REITs (VNQ)

−72%

2018 fourth-quarter selloff: S&P 500

−20%

2018 fourth-quarter selloff: REITs (VNQ)

−13%

2020 COVID crash: S&P 500

−34%

2020 COVID crash: REITs (VNQ)

−42%

2022 bear market: S&P 500

−25%

2022 bear market: REITs (VNQ)

−33%

Price change of SPY and VNQ over each crash's S&P 500 peak-to-bottom window, from the crash study at /studies/etf-crashes (snapshot of 2026-09-16). Prices only. Four crashes is a small sample, and past crashes do not predict the next one.

Why interest rates hit REITs so hard

REITs are sensitive to interest rates in two ways. They borrow heavily to buy property, so higher rates raise their costs. And investors who buy them for income compare their yield with what safe bonds pay: when bond yields jump, a REIT's yield looks less special, and its price falls until the yield catches up.

2022 showed both at once. As rates rose at the fastest pace in decades, REITs fell about 33% over the months stocks fell. Utilities, another income-heavy sector, fell about 13%, and even the total US bond market (BND) fell about 16%. REITs had not regained their January 2022 price high by September 15, 2026, the end of the study's data, while the S&P 500 had regained its own by January 19, 2024.

Price change during four stock market crashes (approximate)
Crash	S&P 500 (SPY)	REITs (VNQ)	Utilities (XLU)	US bonds (BND)
2008 financial crisis	-56%	-72%	-45%	+1%
2018 fourth-quarter selloff	-20%	-13%	-3%	0%
2020 COVID crash	-34%	-42%	-36%	-2%
2022 bear market	-25%	-33%	-13%	-16%

Price change over each crash's S&P 500 peak-to-bottom window, from the crash study at /studies/etf-crashes (snapshot of 2026-09-16). Dividends and interest excluded, so total returns were somewhat better, most of all for the higher-yielding REITs and utilities.

Slow recoveries, and what the income does

Falling further usually means a longer climb back. After the 2020 crash, REITs took about 14 months from their bottom to regain their old price high, against about 5 for the S&P 500. After 2008 the two took a similar time, about 50 and 48 months, but from a much deeper hole.

The income softens this. A REIT fund often yields around 3% to 4% a year, two to three times the S&P 500's, and those payments keep arriving through most downturns, although REITs can and do cut them, as many did in 2009 and 2020. The counts above use price only; with the income reinvested, REITs recovered somewhat sooner.

Taxes, and the REITs you already own

In the US, most REIT dividends are taxed as ordinary income rather than at the lower rate for qualified dividends. That is why many investors who hold REITs keep them in a tax-sheltered account, such as an IRA, 401(k), RRSP or TFSA. Rules differ by country and account, so check yours.

You may also own more real estate than you think. A total US stock market fund already holds REITs at their market weight, a few percent of the fund, so a separate REIT fund is a tilt on top of that. And if you own your home, a large share of your net worth is already in property, in one city.

How much, if any

There is no correct amount. Many diversified portfolios hold no separate REIT fund and rely on the REITs inside their total-market fund. Some lazy portfolios add 5% to 10%, and a few go further, such as David Swensen's portfolio at 20% real estate. A few questions help decide where you sit:

•What is it for? REITs add income and a different mix of businesses, but in this sample they did not cushion crashes. If crash protection is the goal, bonds and cash have done that job more reliably.
•How rate-sensitive is the rest of your portfolio? REITs, utilities and long bonds can all fall together when rates rise fast, as in 2022.
•Where will you hold it? Their income is usually taxed less favorably, so the account matters more than for most stock funds.
•Rebalancing: a slice that falls further and recovers more slowly will drift below its target in a crash. Topping it back up is where most of any diversification benefit comes from.

Test it on your own portfolio

The useful question is not whether REITs are good, but what a real estate slice would do to your mix. Backtest your portfolio with and without, say, 10% in a REIT fund and compare the maximum drawdown, the recovery time and the total return over the whole period. Then replay both versions through 2008, 2020 and 2022 in the stress test.

Educational, not advice: whether REITs belong in your portfolio depends on your goals, your need for income, your taxes and everything else you own, including your home.

Try it yourself

Stress Test / ScenariosReplay a portfolio with a REIT slice through 2008, 2020 and 2022.Open tool →Backtest PortfolioRun your mix with and without REITs and compare drawdowns and total return.Open tool →Compare VNQ vs VTIREITs against the total US stock market, on real data.Open tool →Asset CorrelationsSee how closely REITs move with the rest of your holdings.Open tool →

FAQ

Are REITs a good hedge against a stock market crash?: Not in the four big selloffs since 2008. A broad REIT fund (VNQ) fell further than the S&P 500 in 2008 (-72% against -56%), 2020 (-42% against -34%) and 2022 (-33% against -25%), and less only in the late-2018 selloff. They are stocks, and in a crash they have behaved like riskier ones.
Why did REITs fall so much in 2022?: Interest rates rose at the fastest pace in decades. REITs borrow heavily, so their costs rose, and their income looked less attractive next to suddenly higher bond yields. Rate-sensitive assets of all kinds, including utilities and bonds, fell together that year.
Are REITs a good hedge against inflation?: Over long periods, rents and property values have tended to rise with prices, which is the case for REITs as an inflation hedge. Over short periods it has not worked reliably: in 2022, with US inflation near a 40-year high, REITs fell sharply because the interest rates that come with inflation hit them first.
How much of a portfolio should be in REITs?: There is no rule. Many portfolios hold none beyond the few percent already inside a total-market fund, some lazy portfolios add 5% to 10%, and a few hold 20%. The right amount depends on what the slice is for, your taxes, and how much property you already own, including your home. Backtesting your own mix with and without REITs shows the trade-off.
Is a REIT fund the same as owning rental property?: No. A REIT fund is spread across thousands of properties of many types, is managed for you, and can be sold in seconds, but its price moves every day with the stock market. A rental property is concentrated in one place, takes work, uses a mortgage, and is hard to sell quickly, but its value is not marked to market daily, which can make it feel steadier than it is.

Key terms in this guide

Plain-English definitions in the Learning Hub.

Interest-rate shock →Maximum drawdown →Dividend yield →Correlation →Stress test →

Already computed · real data

All stocks vs with 10% REITs on real data

Side by side, same dates

All stocks (VTI 100%) grew from $10,000 to $76,272 between Jan 2007 and Oct 2026 (10.8% a year). Its worst fall was -51%, from Oct 2007 to Feb 2009, and it took 53 months (about 4 years) to get back to that high. The same with a 10% REIT slice (VTI 90%, VNQ 10%) grew from $10,000 to $69,802 between Jan 2007 and Oct 2026 (10.3% a year). Its worst fall was -52%, from Oct 2007 to Feb 2009, and it took 52 months (about 4 years) to get back to that high.

Real 2007-01 to 2026-10 data, dividends reinvested, rebalanced yearly. Past performance doesn't predict future results.

Growth of $10,000, Jan 2007 to Oct 2026

All stocks (VTI 100%)The same with a 10% REIT slice (VTI 90%, VNQ 10%)

Run all stocks with your own numbers →Run with 10% REITs with your own numbers →

Keep watching one of them, free: all stocks or with 10% REITs. A free account saves it as your plan and checks it for you every month.

For educational and informational purposes only, not financial, investment, tax, or legal advice. Backtests are hypothetical; past performance does not guarantee future results.