Real estate stocks slip as Fed hikes, mortgage rates continue to climb
Real estate stocks dropped in the week that the Federal Reserve hiked interest rates for the first time in three years as the central bank tries to tamp down inflation that had remained elevated for more than five years.
Mortgage rates followed, with the average 30-year mortgage rising to nearly 7% and keeping pressure on the housing market. The US 10-year Treasury yield ended the week at 5.00%, up 3 basis points from a week ago.
For the week ended Sept. 18, the S&P 500 Real Estate Sector Index fell 2.3%, with residential REITs taking the biggest hit, falling 4.8%, and industrial REITs faring the best, losing only 0.7%. By comparison, the broader S&P 500 Index ticked down 0.1%.
The week saw a setback for Zillow (Z) (ZG) as a court denied the online residential brokerage a preliminary injunction in its case against Compass (COMP) and Midwest Real Estate Data. Zillow class C shares (Z) fell 10% for the week, while Compass (COMP) dipped 5.4%.
During the week, two real estate joint ventures were announced. Realty Income (O) formed a euro-denominated joint venture to invest in stabilized net lease assets across four countries in Europe: Spain, Ireland, Poland, and the Netherlands. Digital Realty (DLR) and entered the republic of Türkiye through a strategic joint venture with Rönesans Infrastructure to develop and operate next-generation data centers in the country.
Among notable stock gainers for the week, one was a life-science-focused REIT, and three were industrial REITs.
Alexandria Real Estate Equities (ARE), which owns life science properties in the Boston, San Diego, Bay Area, New York City, and Maryland hubs, ran up 4.2%.
EastGroup Properties (EGP), an industrial REIT, gained 2.2%.
Stag Industrial (STAG) increased 1.2%, and Rexford Industrial REIT (REXR), which completed a $1.2B portfolio sale, grew 0.9%.
Pebblebrook Hotel Trust (PEB) climbed 1.1% during the week.
The largest decliners comprised a mix of real estate sectors. Fermi (FRMI), which develops electric grids for data centers, slid 9.5%.
Residential online platform Opendoor Technologies (OPEN) fell 8.2% as the Fed hike propelled mortgage rates higher.
Mortgage REIT Armour Residential (ARR) dropped 7.1%.
Essential Properties Trust (EPRT), which leases to service-oriented and experience-based businesses, slid 7.1%.
Hospital landlord Medical Properties Trust (MPT) ended the week down 6.6%, erasing a rally early on Thursday spurred by the sale of two hospitals.
Source: SeekingAlpha