The early arrival of a Santa Claus rally has graced the real estate sector, with the bearer of good tidings being none other than Federal Reserve Chair Jerome Powell, who has signaled the possibility of interest rate cuts in 2024.
This anticipation, coupled with the sector’s high sensitivity to the move in Treasury yields — with the 10-year note falling below the 4% threshold — has triggered a spectacular bullish wave across real estate stocks in recent sessions.
Since the release of the Federal Open Market Committee (FOMC) rate statement and Powell’s subsequent press conference Wednesday, no sector within the S&P 500 index has seen growth anywhere near that of real estate.
Market Snapshot: S&P 500 Sector Performance Since Fed Meeting
A glimpse at the S&P 500 sector performance since 2 p.m. Wednesday to 3 p.m. Thursday reveals the following:
| ETF Name | Performance (%) |
|---|---|
| Real Estate Select Sector SPDR Fund XLRE | +6.21% |
| Energy Select Sector SPDR Fund XLE | +4.07% |
| Materials Select Sector SPDR Fund XLB | +3.58% |
| Consumer Discretionary Select Sector SPDR Fund XLY | +3.29% |
| Industrials Select Sector SPDR Fund XLI | +2.67% |
| Financial Select Sector SPDR Fund XLF | +2.46% |
| Utilities Select Sector SPDR Fund XLU | +1.23% |
| Communication Services Select Sector SPDR Fund XLC | +1.2% |
| Health Care Select Sector SPDR Fund XLV | +0.48% |
| Technology Select Sector SPDR Fund XLK | +0.47% |
| Consumer Staples Select Sector SPDR Fund XLP | -0.06% |
Read also: Real Estate, Small-Cap, Gold Miner, Solar Stocks Go Wild On Prospect Of Fed Rate Cuts
Chart: Real Estate Outperforms All Other Sectors Since Fed’s Dovish Pivot
Top Real Estate Stock Movers
Leading the performance within this week’s XLRE ETF are the following stocks:
| Name | Industry | Price Chg. % (5D) |
|---|---|---|
| Prologis, Inc. PLD | Industrial REITs | 14.91% |
| Boston Properties, Inc. BXP | Office REITs | 13.05% |
| Extra Space Storage Inc. EXR | Specialized REITs | 12.52% |
| Kimco Realty Corporation KIM | Retail REITs | 11.57% |
| Simon Property Group, Inc. SPG | Retail REITs | 10.96% |
| Host Hotels & Resorts, Inc. HST | Hotel and Resort REITs | 10.29% |
| Essex Property Trust, Inc. ESS | Residential REITs | 10.28% |
| Alexandria Real Estate Equities, Inc. ARE | Office REITs | 10.07% |
| CBRE Group, Inc. CBRE | Real Estate Management and Development | 9.75% |
5 ETFs To Get Exposure To Rate-Sensitive Real Estate Stocks
The XLRE ETF provides extensive coverage of the real estate sector, encompassing a variety of industries including industrial, office, hotel and resort, residential and specialized REITs.
A similar broad exposure is offered by the Vanguard Real Estate ETF VNQ and the iShares U.S. Real Estate ETF IYR, both of which have displayed performance nearly identical to XLRE in the last two sessions.
Within the realm of real estate-linked ETFs, two in particular have shown even more remarkable performance.
For investors seeking exposure to U.S. REITs that hold residential and commercial mortgages, the iShares Mortgage Real Estate ETF REM is the go-to. This ETF in particular has also benefited from a Thursday announcement by Freddie Mac, which reported a dip in the average rates for 30-year mortgages below 7% for the first time since August.
The REM ETF has rallied 7.3% since the Fed meeting, outperforming the aforementioned funds.
Finally, there is a leveraged ETF, the Direxion Daily Real Estate Bull 3X Shares DRN, which has skyrocketed 18% in the last two sessions, offering a more aggressive bet on the real estate sector’s bullish run.
Read now: Best REITs to Buy
Photo: Shutterstock, Unsplash and International Monetary Fund on Flickr.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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