Major real estate stocks see marginal losses, REITs continue to gain
Major real estate stocks experienced slight losses this week, while REITs gained, particularly those with significant sales to China. The Real Estate Select Sector SPDR ETF closed down 0.87%, and the Dow Jones REIT Index fell 0.24%. However, the FTSE Nareit All Equity REITs index rose 0.22%, benefiting from a recent 50 basis point rate cut by the Federal Open Market Committee. The commercial real estate market faces challenges, but the Fed's easing may signal a potential recovery. Notable losers included Essex Property Trust and Equity Residential, while Ventas and Healthpeak Properties performed well.
Major real estate stocks saw marginal losses this week, though REITs largely continued to gain, as investors focused on companies with the highest percentage of sales to China.
Shares of U.S. companies with the highest percentage of sales to China posted strong returns this week, Wells Fargo noted. China-related ETFs, including the SPDR S&P China fund and the iShares MSCI China ETF, also flew higher this week.
The rally came as authorities in the world's second-largest economy unveiled stimulus measures, including rate cuts on existing mortgages, to aid the struggling property market and bolster overall growth.
Real estate stocks remained on the sidelines, with the Real Estate Select Sector SPDR ETF (NYSEARCA:XLRE) closing the week 0.87% lower at $44.29.
Dow Jones REIT Indx Equity REIT Total Return Index (NASDAQ:REIT:IND) finished 0.24% down from last week.
Meanwhile, the FTSE Nareit All Equity REITs index (INDEXFTSE: FNER) ended 0.22% higher as the sector is seeing a revival on the back of a large rate cut of 50 basis points by the Federal Open Market Committee last week.
Sector News
- The commercial real estate market has been mired in the worst downturn since the 2008 financial crisis, battered by the work-from-home shift, as well as higher borrowing costs and tumbling property prices. But the Federal Reserve's monetary easing cycle, initiated last week, may set the stage for a recovery, Wells Fargo said in a Wednesday note.
- Northeast Bank said it has bought primarily commercial real estate loans in the amount of unpaid principal balance of $805M.
- Short interest in S&P 500 real estate stocks fell slightly to 1.95% at August-end from 1.96% in the prior month.
XLRE saw $17.93M of outflows this week, compared to inflows worth $139.12M a week prior, data solutions provider Vettafi said. This is despite investor pessimism about the short-term outlook for the stock market decreasing this week, as per the recent AAII Sentiment survey.
Seeking Alpha authors and the Quant Rating system rate the fund as Buy.
Winners & Losers
Multi-family residential REITs Essex Property Trust (ESS) and Equity Residential (EQR) and the hotel and resort REIT Host Hotels & Resorts (HST) were the biggest losers of the week among the S&P 500 real estate stocks.
Health care REITs Ventas (VTR) and Healthpeak Properties (DOC) were the notable winners.
Here is a look at the subsector performance for the week:
