With that history, he says, it's unreasonable to expect the real estate market to sustain the gains of the past four years.

"Those kinds of total returns just are sort of above the long-run expected return, and they run ahead of the kind of returns one would expect from real estate," he says.

That's why Grupe and others say the way an investor reacts to the April downturn probably will depend on what the investor was doing in the real estate sector in the first place.

If it was someone looking for yield or capital appreciation only, there's a good chance they'll be running scared. Asset allocators, meanwhile, are going to stay put.

Observers, in fact, feel it was the yield mongers who were largely responsible for the rash of selling. The reason: The sell-off didn't make a whole lot of sense.

While it is true that the strong jobs report of late March could foreshadow an increase in interest rates, it is also true that interest rates have historically had little impact on real estate performance over the long run. And the bull market in many types of real estate, most notably housing, isn't slowing down at all. If anything, it's getting just as frothy as REIT prices did.

The knee-jerk reaction was that higher interest rates would spell bad news for real estate companies leveraged with debt. Virtually ignored was the fact that the jobs report signaled a stronger economy, which would have a clearly positive ripple effect throughout the real estate industry. Also unrecognized was the boost higher interest rates would have on the residential apartment sector, whose high vacancy rates have been partly due to the availability of low-rate mortgages.

Debra Morrison, a principal with RegentAtlantic Capital in Chatham, N.J., feels the April selloff was precipitated by "amateurs" who invested in real estate solely in search of yields and with little understanding of the asset class. "REITs basically are a quality long-term diversifier," she says. "They're simply more than just yield machines."

With yields in 2000 to 2002 that averaged more than 7%, the real estate sector did attract many investors who were looking for alternatives to Treasuries. Yet what many investors may not have realized, says Morrison, is that the dividend tax cuts signed into law last year largely do not apply to REIT dividends. This is due to the fact that REITs generally do not pay corporate taxes.

NAREIT estimates that only about a third of REIT dividends qualify for the 15% dividend-tax rate. The rest are usually subject to ordinary income tax. "The trouble is that unsuspecting investors I think have been lured in by the headlines, but once you look at the tax effect it may be disappointing," Morrison says.