I do not suggest investing in a REIT in a rising interest rate environment, but if you decided to, I’d invest through a traditional or Roth IRA and balance the remainder of your portfolio through your 401k and taxable accounts (ensure the funds you buy in your taxable account are tax efficient!).
Alternatively, you might try to see if your 401k provider supports in service distributions (exporting funds to your IRAs without you separating from the company). You could then invest in the funds you’d like, not limited to your 401k selection.
But I 100% agree with you. Pretty much every young working person is already extremely over-exposed to the housing market via their rent costs which easily might be 30-50% or more of your after-tax salary and can go up every year. Investing a big part of your savings in your local housing market seems like a smart way to hedge.
REIT's do seem fairly complex and obscure though, and it seems like you usually have to back a single developer or project and put in a fairly large minimum investment. I can easily buy an index fund that tracks S&P performance, why isn't there a simple index fund I can buy that tracks the SF housing market performance? I guess because it's a totally private market?
Not sure I'd buy into REITs when interest rates are set to go up, if you buy into a highly leveraged REIT and their interest payments go up you're going to lose a lot of money.
edit: Open a Vanguard IRA (Roth if you can), max out yearly contributions, buy VOO and VTI and hold until retirement. Add in some bonds as you see fit. Put at least as much as your employer will match into your 401k, more if you can afford it. Take the steady 6-7% return, you'll be hard pressed to beat it on your own. You'll be sitting on millions of dollars when you retire with this strategy.
That's how I felt in 2007 but in 2012 many of those homes were then selling for 30cents on the dollar.
I am not saying that 2018 feels like 2007 (or maybe...), but your are only 27 so there are likely a few 2007s that will occur in your lifetime.
in sf, 2008 saw houses back to 2004 prices, just to skyrocket above the record a year later.
I know it's super difficult to move for lots of reasons, but just in case you're not aware: there are lots of places where you could both get a job and buy a house.