Real estate investment trusts, or REITs, have underperformed the overall stock market for some time. Over the past decade, the Vanguard Real Estate ETF (VNQ +1.40%) has delivered annual total returns of just 5.1%, compared with 14.3% for the Vanguard Total Stock Market ETF (VTI 0.23%). However, this has been largely due to macroeconomic and overall stock market conditions, rather than poor performance by REITs themselves. Specifically, there are three big reasons why real estate has underperformed the overall market so badly:REITs tend to perform best in low-interest rate environments. The long-term average returns of the stock market are about 10% annually, so not only has real estate performed poorly, but the overall stock market has performed exceptionally well.