Real estate was one of the worst-performing sectors in 2022, as rising interest rates and low demand pummeled both residential and commercial real estate investment trusts (REITs). The Real Estate Select Sector SPDR ETF has declined by 27.8% year to date. In comparison, the benchmark S&P 500 index is down only 19.7% in 2022.
Though the majority of publicly-traded real estate investment trusts (REITs) have been recovering over the past two months, the Federal Reserve’s hawkish stance combined with the macroeconomic uncertainties raise questions regarding their latest upswing.
The carnage in the real estate investment trust sector continues as new names hit new 52-week lows. The effect of rising interest rates is hitting the group hard and it’s not clear when the Fed might “pivot” to lower rates – late 2023, early 2024? In the meantime, these rate-sensitive REITs are not attracting buyers the way they used to.