REITs fall out of favor as interest rates rise

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

TRD 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

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

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

WeWork co-CEOs Artie Minson and Sebastian Gunningham

WeWork under pressure as losses soar to $1.25B

195 Broadway and L&L Holding's David Levinson and Robert Lapidus (Credit: Google Maps and L&L Holding)

L&L, Safehold lock in $592M in financing for Downtown building

Tore Steen, CEO of CrowdStreet (Credit: iStock)

CrowdStreet lands $12M in financing, hires execs

A rendering of the The Epic in Dallas, Texas and Westdale CEO Joe Beard (Credit: Westdale, Wikipedia)

No panic: Westdale mulls $50M Series B bond raise in Tel Aviv

(Credit: iStock)

S&P hits another record, but real estate stocks don’t follow suit

Joel Schreiber (Credit: Shir Stein and Wikipedia)

WeWork’s first investor used his stock as collateral. Now his lenders are suing him