Real estate stocks capsize after inflation report

The dour economic outlook reported this week dipped real estate shares to their lowest point in more than a year. 

An index of real estate shares lost more than 4 percent after a worse-than-expected inflation outlook landed this week, Bloomberg reported. The index dipped to its single worst day since mid-2022, proving to the S&P 500’s worst performer on Wednesday and ending the day as the worst-performing sector so far this month.

Real estate stocks were widely expected to surge further this year as the Federal Reserve ceased its recent interest rate hikes and signaled the potential for several cuts this year; real estate is one of the sectors most linked to borrowing costs, along with the utilities sector.

But Wednesday’s inflation rate put a damper on that prospect. The core consumer price index rose 0.4 percent from February and remained static at 3.8 percent year-over-year, countering expectations. The report could thwart the possibility of the Fed enacting a rate cut as soon as June.

SBA Communications and Extra Space Storage had particularly bad days on the stock market percentage-wise. Other companies to take a hit include Easterly Government Properties, down nearly 5 percent, Vici Properties and Kilroy Realty, which dropped 6 and 7 percent, respectively, and Opendoor, which dropped 11 percent, according to The Motley Fool.

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Shareholders of real estate companies can only hope that inflation doesn’t continue to persist. If it does, the Fed could take drastic measures, including hiking interest rates again after pausing a series of seemingly constant jumps — which could send stocks scuttling even further.

There have been some highlight moments for real estate stocks recently. Apartment owners, particularly, have spent time benefiting this week from Blackstone’s $10 billion bet on the sector through its acquisition of AIR Communities, sending the stocks of other multifamily companies soaring.

— Holden Walter-Warner