Here's Why Real Estate Stocks Got Crushed Tuesday

The stock market took a hit on Tuesday as treasury yields continued to inch higher. But real estate stocks got hit particularly hard, with the Real Estate Select Sector SPDR Fund XLRE closing down nearly 2%.

Real estate tech stocks, like Zillow Group Inc ZG and Opendoor Technologies Inc OPEN closed down about 7% and 10% respectively. Mortgage rates inched higher, nearing 8%, hitting their highest point since 2000.

Higher mortgage rates have softened the demand for new buyers, and have also limited supply of houses listed because people who are locked into their rates are more likely to stay in their homes. Rocket Companies Inc RKT was also hit hard as mortgage rates moved higher, with Rocket’s stock closing down more than 6% Tuesday. 

It’s possible that weakness in the housing market incentivizes the Fed to pause rate hikes or even eventually cut, as a major drop in housing prices could cause ripple effects throughout the economy and markets. If mortgage rates continue to move higher, look for more weakness in real estate stocks.