REITs fall out of favor as interest rates rise

S&P 500 real estate stocks saw 1.2% decline last week

New York /
Jun.June 18, 2018 01:09 PM

Westfield World Trade Center at 185 Greenwich St (Credit: Wikipedia)

As interest rates rise, investors are questioning whether they’d be better off parking their money in bonds than real estate investment trusts.

Last week, the Federal Reserve announced that it would raise interest rates by a quarter percentage point. Following this news, S&P 500 real estate stocks fell 1.2 percent last week and are down 4.3 percent for the year — the worst performance of any S&P sector, the Wall Street Journal reported.

The Fed plans to increase rates two more times this year, bringing rates to between 3.25 and 3.5 percent by the end of 2020. REITs thrive when interest rates are low: Real estate stocks in the S&P 500 saw a 7.2 percent increase in 2017. Following Wednesday’s news, the yield on 10-year U.S. government bonds momentarily rose above 3 percent.

“We’re at the point where interest rates are starting to actively compete with high dividend yielding stocks for investors’ dollars,” Steven Violin, senior vice president and portfolio manager at F.L. Putnam Investment Management Company, told the Journal.

In February, The Real Deal reported that REITs were having a disappointing 2018 so far. [WSJ] — Kathryn Brenzel


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)
Real estate stocks push up this week as U.S.-China trade tensions ease
Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Jamestown chairman Christoph Kahl and One Times Square (Jamestown LP, iStock)
Jamestown lands $425M to bring the metaverse to One Times Square
Jamestown lands $425M to bring the metaverse to One Times Square
Ron Perelman with 35 East 62nd Street and 41 East 62nd Street (Getty, Google Maps)
Ron Perelman’s former Lenox Hill offices hit market for $160M
Ron Perelman’s former Lenox Hill offices hit market for $160M
World Wide Group's James Stanton, Suchman Group's Jeffrey Suchman and rendering of 66 Nowedonah Avenue in Water Mill NY (World Wide Group, Getty Images, The Water Mill Crossing)
JS Squared gets financing to build 38 Water Mill townhomes
JS Squared gets financing to build 38 Water Mill townhomes
Lev CEO Yaakov Zar (LinkedIn, iStock)
CRE finance marketplace Lev raises $70M Series B, confirming TRD report
CRE finance marketplace Lev raises $70M Series B, confirming TRD report
Steve Witkoff and a rendering of 565-589 Fulton Street (Witkoff, Beyer Blinder Belle)
Apollo, Witkoff eye $420M construction loan for downtown Brooklyn site
Apollo, Witkoff eye $420M construction loan for downtown Brooklyn site
Deerfield's James Flynn and 345 Park Avenue South (Deerfield, iStock)
Deerfield nabs big refi at life sci property
Deerfield nabs big refi at life sci property
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...