最新ニュース Schwab U.S. REIT ETF (ARCA:SCHH)

Schwab U.S. REIT ETF

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The index excludes mortgage REITs, defined as REITs that lend money directly to real estate owners and/or operators or indirectly through the purchase of mortgages or mortgage-backed securities, and hybrid REITs, defined as REITs that participate both in equity and mortgage investing. It is the funds policy that under normal circumstances it will invest at least 90% of its net assets in securities included in the index.

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American Tower Corp

Equinix Inc. Real Estate Investment Trust

Welltower Inc.

Simon Property Group Inc

Realty Income Corp.

Digital Realty Trust Inc.

Crown Castle International Corp

Public Storage, Series K, 4.750%

Extra Space Storage Reit Inc

Schwab US REIT ETF

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Shares of real estate ETFs are trading higher following a decline in treasury yields which can lower borrowing costs.

2025 promises to be a transformative year for the <a href="https://www.benzinga.com/real-estate">U.S. housing market</a>, offering fresh opportunities but also keeping everyone on their toes. 
Zillow Group Inc's (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ZG#NASDAQ">ZG</a>) (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/Z#NASDAQ">Z</a>) latest <a href="https://www.zillow.com/research/2025-housing-predictions-34620/">predictions</a> reveal shifting dynamics for buyers, sellers, and renters. Investors in the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), the Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>), and the Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) track these dynamics closely.
Read Also: <a href="https://www.benzinga.com/trading-ideas/short-ideas/24/12/42265808/top-3-real-estate-stocks-that-may-plunge-this-quarter">Top 3 Real Estate Stocks That May Plunge This Quarter</a>
Here are five trends to watch closely:
<h2 class="wp-block-heading">1. Breathing Room For Buyers Amid A Modest Market</h2>
Good news for buyers: more inventory is set to hit the market, giving you time to weigh options and negotiate harder. Zillow forecasts a modest 2.6% home value growth and an uptick in existing home sales to 4.3 million, signaling a gradual thaw in a market that's been tight for years.
<h2 class="wp-block-heading">2. Mortgage Rate Whiplash</h2>
Mortgage rates will remain the wildcard. While Zillow expects rates to ease overall, their volatility could unsettle even seasoned buyers. Expect refinancing booms during dips and a roller-coaster affordability picture throughout the year.
Investors in the iShares MBS ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MBB#NYSE">MBB</a>) and the Vanguard Mortgage-Backed Securities ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VMBS#NYSE">VMBS</a>) may face heightened uncertainty.
<h2 class="wp-block-heading">3. Buyers Markets Spread Westward</h2>
Currently concentrated in the Southeast, buyers markets are predicted to expand into the Southwest, giving buyers more power in negotiations. 
If mortgage rates fall significantly, however, sellers might regain the upper hand as competition heats up.
<h2 class="wp-block-heading">4. The Rise of Smaller, Smarter Homes</h2>
Forget large mansions. Compact, purpose-driven homes are taking center stage. Listings describing properties as "cozy" have surged 35%, reflecting a cultural shift toward sustainable, affordable living. Urban condos are also stabilizing in value, according to Zillow, drawing buyers back to city life.
<h2 class="wp-block-heading">5. Renter Perks Are On Borrowed Time</h2>
A surge in multifamily construction has made 2024 a renter-friendly year, with concessions like free rent and parking aplenty. But Zillow predicts these perks will wane by late 2025 as the rental market tightens. Renters with pets will remain a dominant force, pushing property managers to adopt more pet-friendly policies or risk losing tenants.
2025's housing market is set to be more active and buyer-friendly, but unpredictability looms large. From mortgage rate swings to shifting buyer trends, staying agile and informed will be key to making the most of this evolving landscape.
Read Next: 
<ul>
<li><a href="https://www.benzinga.com/real-estate/24/12/42287030/real-estate-veteran-pens-open-letter-to-donald-trump-resurrecting-housing-will-require-innovative-and-daring-solutions">Real Estate Veteran Pens Open Letter To Donald Trump: &#8216;Resurrecting Housing Will Require Innovative And Daring Solutions&#8217;</a></li>
</ul>
Image created using artificial intelligence via Midjourney.

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XLRE

5 Housing Market Trends For 2025: What Zillow's Forecast Means For You

Bank of America has <a href="https://www.benzinga.com/markets/cryptocurrency/24/09/41003610/veteran-investor-mark-moss-predicts-bitcoin-to-surge-to-300k-if-donald-trump-wins-the-elec">spotlighted three sectors</a> that could benefit from the Federal Reserve&#8217;s rare dual approach of rate cuts and rising corporate profits.
What Happened: Savita Subramanian, BofA&#8217;s head of U.S. equity and strategy, referred to this situation as a &#8220;rare double whammy of stimulus&#8221; during her <a href="https://www.youtube.com/watch?v=n-vbFcslt8Q">appearance</a> on CNBC on Monday. 
She recommended investors focus on value stocks in real estate, financials, and energy sectors.
Subramanian noted that value stocks, which trade below their fundamental value, tend to outperform when profits rise and rates fall. This scenario reduces the need for hedging and encourages investment in higher-upside names.
&#8220;I think about where these assets sitting in retiree accounts and money market funds are going; I think they&#8217;re going into safe, stable income. That&#8217;s more value than growth,&#8221; she said.
Real estate benefits from significant investments in data centers, crucial for artificial intelligence infrastructure, while financials and energy sectors have improved their quality and capital returns since the last decade. 
Subramanian emphasized the appeal of high dividends in these sectors as short-term yields decline, making dividend-yielding stocks attractive for income-seeking investors.
See Also: <a href="https://www.benzinga.com/markets/cryptocurrency/24/09/41081939/trump-wants-us-to-be-bitcoin-mining-capital-of-the-world-core-scientifics-move-to-buy-chip?itm_source=parsely-api" target="_blank" rel="noreferrer noopener">Trump Wants US To Be Bitcoin Mining Capital Of The World</a>
The following ETFs are notable performers within their respective sectors. In the real estate category, iShares Core U.S. REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USRT#NYSE">USRT</a>), Schwab U.S. REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>), and SPDR DJ Wilshire REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/RWR#NYSE">RWR</a>) stand out as top options.
In the financial sector, SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>), iShares U.S. Regional Banks ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IAT#NYSE">IAT</a>), and SPDR S&amp;P Bank ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KBE#NYSE">KBE</a>) have emerged as leading performers. 
For those looking into energy investments, Direxion Energy Bull 2X Shares (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ERX#NYSE">ERX</a>), Fidelity MSCI Energy Index ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FENY#NYSE">FENY</a>), and SPDR Select Sector Fund &#8211; Energy Select Sector (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLE#NYSE">XLE</a>) represent some of the top options.
Why It Matters: The identification of these value sectors comes at a time of significant economic and political uncertainty. Investors are currently grappling with U.S. economic uncertainty, shifts in Federal Reserve policy, and the upcoming presidential election.
The CBOE Volatility Index (VIX), a key gauge for measuring protection against <a href="https://www.benzinga.com/markets/24/09/40796352/trump-vs-harris-u-s-stock-market-faces-rising-risks-amid-economic-uncertainty-and-2024-election">stock market fluctuations</a>, has climbed to around 20, a significant rise from its 2024 average of 14.8. This surge in volatility is a typical pattern during election years, as investors weigh the market implications of policy proposals from candidates.
Steve Eisman, known for his role in <a href="https://www.benzinga.com/markets/equities/24/09/40951546/big-short-fame-investor-drops-previous-prediction-of-trump-victory-the-market-is-going-straight-">predicting the 2008 financial crisis</a>, recently withdrew his prediction of a Trump victory, adding uncertainty to market forecasts. 
Read Next: 
<ul>
<li><a href="https://www.benzinga.com/markets/equities/24/09/41097541/amazon-apple-tesla-brace-for-supply-chain-disruptions-as-potential-east-coast-dockworkers-strike?itm_source=parsely-api" target="_blank" rel="noreferrer noopener">Amazon, Apple, Tesla Brace For Supply Chain Disruptions As Potential East Coast Dockworkers Strike Nears</a></li>
</ul>
Image Via Shutterstock 
Disclaimer:&nbsp;This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Equities

News

Federal Reserve

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iShares Dow Jones US Regional Banks Index Fund

USRT

BofA Highlights 3 Value Sectors Amid Fed's 'Rare Double Whammy' Of Stimulus

The <a href="https://www.benzinga.com/topic/covid-19">COVID-19 pandemic</a> accelerated a trend of workers preferring remote work to in-person office attendance. 
Meanwhile, <a href="https://www.benzinga.com/topic/commercial-real-estate">commercial real estate</a> across the U.S. has suffered as companies do not value expansive office spaces as they did before.
The Data: A <a href="https://x.com/KobeissiLetter/status/1817971321277763942">post</a> on X relayed data from Arbor Data Science.
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
<div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">The commercial real estate crisis is spreading: US office vacancy rates in San Francisco reached 25.4% in June, the most among major American metros. This is followed by Houston and Seattle where office vacancy rates are 23.8% and 23.2%. The lowest vacancy rates are still a… <a href="https://t.co/TzeveqJV0N">pic.twitter.com/TzeveqJV0N</a>
&mdash; The Kobeissi Letter (@KobeissiLetter) <a href="https://twitter.com/KobeissiLetter/status/1817971321277763942?ref_src=twsrc%5Etfw">July 29, 2024</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
<figcaption class="wp-element-caption">The following U.S. metropolitan areas have the highest office vacancy rates.</figcaption></figure>
<ul>
<li>San Francisco, California — 25.4% </li>
<li>Houston, Texas — 23.8% </li>
<li>Seattle, Washington — 23.2% </li>
<li>Austin, Texas — 22.9% </li>
<li>Denver, Colorado — 22.1% </li>
</ul>
San Francisco&#8217;s Bay Area, which includes Silicon Valley, is the heart of technology companies in the U.S. A 25.4% vacancy rate is much higher than its 9.3% median vacancy <a href="https://www.normmiller.net/wp-content/uploads/2015/04/Revisiting-the-Derivation-of-an-Equilibrium-Vacancy-Rate1.pdf">rate</a> from 1997 to 2013 (as found in a 2014 Journal of Real Estate Portfolio Management article).
Meanwhile, the bottom five cities have weathered the storm comparatively well.
<ul>
<li>Miami, Florida — 12% </li>
<li>Boston, Massachusetts — 12.8% </li>
<li>Tampa, Florida — 13.3% </li>
<li>Charlotte, North Carolina — 14.9%</li>
<li>Philadelphia, Pennsylvania — 15.3% </li>
</ul>
The U.S. overall office space vacancy rate crossed 20% for the first time in 2024&#8217;s second quarter, <a href="https://cre.moodysanalytics.com/insights/cre-trends/q2-2024-preliminary-trend-announcement/">according</a> to Moody&#8217;s.
Market Implications: REITs with commercial real estate holdings have by and large struggled since the onset of the pandemic:
<ul>
<li>Alexandria Real Estate Equities Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ARE#NYSE">ARE</a>) is the largest office REIT by market cap. It owns properties in San Francisco and Boston, among other locations. Its share price is down over 18% in the past five years.</li>
<li>BXP Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BXP#NYSE">BXP</a>), formerly Boston Properties, owns buildings in Boston, San Francisco and Seattle. Its share price is down 45% in the past five years.</li>
<li>Hudson Pacific Properties, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HPP#NYSE">HPP</a>) owns properties on the West Coast with exposure to San Francisco and Seattle. Its market capitalization is 83% less than it was five years ago.</li>
<li>Cousins Properties Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CUZ#NYSE">CUZ</a>) owns properties in Austin, Charlotte and Tampa, among other locations. Cousins shares are trading nearly 20% lower now than five years ago.</li>
<li>Kilroy Realty Corporation (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRC#NYSE">KRC</a>) owns office buildings in San Francisco and Austin. Its share are trading over 50% lower than five years ago.</li>
</ul>
Several exchange-traded funds (ETFs) track the real estate industry with some exposure to office REITs, including:
<ul>
<li>The Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>)</li>
<li>The Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>)</li>
<li>The Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>)</li>
</ul>
These funds have fared better than the individual office REITs due to their diversification.
Now Read:
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<li><a href="https://www.benzinga.com/real-estate/24/04/38111796/why-fitch-thinks-the-coming-commercial-real-estate-crash-could-be-worse-than-2008">Why Fitch Thinks The Coming Commercial Real Estate Crash Could Be Worse Than 2008</a></li>
</ul>

Sector ETFs

Economics

ETFs

Work From Home Has Hit Office Real Estate The Hardest In These 5 US Cities

Foreign investment in U.S. homes has dropped to its lowest in 15 years, as per a fresh report by the National Association of Realtors.
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/06/39482229/home-prices-reach-new-record-highs-yet-signs-of-normalization-emerge">Low supply and high prices</a> have scared many foreign investors away from U.S. real estate, marking the seventh consecutive yearly drop in sales for this cohort.
The U.S. Home Market Slump: Unusually high inflation has pushed mortgage rates up, forcing many homeowners to stay in their current homes, bringing the supply of houses down significantly.
In this context, people who might have been looking for a new home are incentivized to stick to their low mortgage rates instead of selling their home in exchange for a more expensive mortgage.
The fall home sales hit its worst point in 28 years during 2023; and 2024 is lining up to be even worse. Looking at completed sales up to April, at this rate, 2024 would come with a drop of almost 2% since the previous year.
The panorama could change if the Fed decides to drop interest rates in an upcoming meeting. During a Wednesday call, a Bank of America economist <a href="https://www.benzinga.com//node/39819662">argued that the most likely rate cut will come in December</a>, against consensus from other colleagues who expect a drop by September.
Anticipation for an upcoming rate cut already caused a positive effect on the real estate market. On Wednesday, one report showed mortgages have come down to a four-month low last week, <a href="https://www.benzinga.com/real-estate/reit/24/07/39816656/fed-rate-cut-expectations-drop-mortgage-rates-to-4-month-lows-surge-in-new-applications-refinanc">with new applications up by almost 4%</a>.
<h1 class="wp-block-heading">Why Do Foreign Nationals Buy Houses In The U.S. And Why Are They Stopping?</h1>
The realtors report looked at two types of investor: foreign buyers who don't reside in the U.S. as well as visa holders who are not permanent immigrants, or new immigrants with less than two years in the country.
Foreign-born individuals with permanent U.S. residencies are not accounted for. For the groups examined, 45% of homes were purchased for use as a rental unit, vacation house, or both.
Yet the intended use of the homes varied greatly between the country of origin of the buyer. Forty-nine percent of Canadian buyers intend to use their homes for vacation, and only 16% as a permanent residency. For buyers from India, it was 6% for vacation and 66% for permanent residency.
Foreign investors might be lured by the U.S. real estate market as a way to diversify their foreign real estate investments in a market that has typically gone up with time.
Yet, the landscape for international buyers has been even worse than for U.S. buyers.&nbsp;
The U.S. dollar has strengthened against foreign currency in previous years, making it even more expensive for investors holding their capital in euros, Chinese yuan or Canadian dollars to purchase a U.S. home. 
Read Also: <a href="https://www.benzinga.com//node/39812270">Jerome Powell&#8217;s Top Advisor Hints At Fed&#8217;s Potential Rate Cut Plans: &#8216;All Moving In The Right Direction&#8217;</a>
While at a slower rate, foreign buyers continued to purchase homes in the U.S., with California, Florida, Texas and Arizona as main destinations. Against some prime locations around the world, the price per square meter for residential properties in the U.S. remains very competitive.
The price per square meter for a home in the San Jose-Sunnyvale-Santa Clara area in California is almost half that of Hong Kong. In Boulder, Colorado, a square meter costs half of that of Oslo, Norway, and a third of the average Canadian price.
In the period running from April 2023 to March 2024, there were only 54,300 U.S. homes sold to international buyers, the lowest it's been since the association began measuring the data point in 2009. This marks a whopping 36% decline since the previous year.
In dollars, this meant a 21% decrease, with purchases worth only $42 billion against $153 billion in 2017
But this year's drop is no exception. There have been year-over-year drops for the last seven periods, from a recent peak of 284,500 U.S. homes bought by foreigners in 2017.
Those who did buy a house in America did it for a higher price. The average sale reached $780,300, a 22% spike from the previous year.
<h1 class="wp-block-heading">Impact On The Market</h1>
Foreign buyers accounted for only 1.3% of all U.S. home sales during the April 2023-March 2024 period, yet they represent a much more significant portion of the market in specific locations like Florida, Texas and California.
While the report analyzed a drop in foreign sales, most of its reasons are domestic, serving to better understand the state of the real estate market for homes in the U.S.
The drop in supply stemming from the rise in interest rates has affected U.S. buyers as much as foreigners.
<a href="https://www.benzinga.com/markets/equities/24/06/39204534/european-central-bank-cuts-interest-rates-by-0-25-but-projects-inflation-above-target-well-into-">Upcoming cuts in interest rates across the globe, and specially in Europe</a> could soon reignite foreign interest in the U.S. market. This might be even more true if it falls in line with an increased supply of homes that could come if mortgage rates continue to drop.
There are several real estate companies focused on the residential sector that are part of the S&amp;P 500 index. These include Equity Residential (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EQR#NYSE">EQR</a>), Essex Property Trust Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ESS#NYSE">ESS</a>), Mid-America Apartment Communities Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MAA#NYSE">MAA</a>), AvalonBay Communities Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AVB#NYSE">AVB</a>) and Invitation Homes Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/INVH#NYSE">INVH</a>).
Most real estate ETFs are not pure-play residential, with the exception of iShares Residential and Multisector Real Estate (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/REZ#NYSE">REZ</a>). Others follow the U.S. real estate market more broadly but are still liable to be affected by swings in the residential home market. These include Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) and Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) among the largest.
Now Read: 
<ul>
<li><a href="https://www.benzinga.com//node/39718690">&#8216;Apocalyptic&#8217; Manhattan Real Estate Deals Keep Coming — Sector Mayhem Or Investment Opportunity?</a></li>
</ul>

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iShares FTSE NAREIT Residential PLUS Capped Index Fund

Foreigners Don't Want Your US Home: Sales Drop To 15-Year Lows For International Buyers

Fed Chair <a href="https://www.benzinga.com/topic/jerome-powell">Jerome Powell</a> said Tuesday the commercial real estate sector will remain <a href="https://www.benzinga.com/topic/commercial-real-estate">under stress for some time</a>.
"It is a risk that has been with us and will be with us for some time, probably for years," Powell told the Senate Banking Committee. "And banks need to be honestly assessing what their risk is."
Many real estate assets purchased before the Covid-19 pandemic with loans from banks and other financial institutions are now worth less than the loans.
See Also: <a href="https://www.benzinga.com/federal-reserve/24/06/39169354/doom-and-gloom-in-office-space-real-estate-delinquency-data-tells-another-story">Doom And Gloom In Office Space Real Estate? Delinquency Data Tells Another Story</a>
As a result, many commercial real estate owners are selling their properties in distress, bringing about a new era of opportunity for real estate investors.
Take the Continental Center in New York City, for example. The 41-story skyscraper, located at 180 Maiden Lane in Manhattan's Financial District, sold <a href="https://commercialobserver.com/2024/07/clarion-mhp-sale-carlo-bellini-180-maiden-lane/">to</a> 99c, a real estate firm owned by Canadian biotech investor Carlo Bellini, for just $297 million.
The same building was purchased in 2015 for $470 million. Clarion Partners and MHP took out a $248 million loan from BlackRock Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BLK#NYSE">BLK</a>) and <a href="https://therealdeal.com/new-york/2024/01/09/financial-district-office-heads-to-distress-sale/">refinanced</a> the debt in 2020 with a $372 million loan led by ING Groep NV (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ING#NYSE">ING</a>).
Clarion and MHP reportedly invested $175 million in renovations, putting their entire investment north of $645 million. They reportedly sold the property quickly to avoid foreclosure.
Clarion didn't reply to a request for comments.
"Manhattan&#8217;s office meltdown has gone from concerning to apocalyptic with little end in sight…" Triple Net Investor, an influencer, <a href="https://x.com/TripleNetInvest/status/1810840957333688701">wrote</a> on X.
For office buildings, the average sale prices per square foot dropped 66% between June 2023 and late May.
The Continental Center, built in 1983, is currently only occupied at 68%, dropping from 71% in January. This is almost three times the average vacancy rate for commercial real estate in New York City, which in March was 12.8% according to the comptroller's office.
Read Also: <a href="https://www.benzinga.com//node/39621351">Mortgage Applications Fall As Rates Climb Back Above 7%</a>
<h3 class="wp-block-heading">Why Is Commercial Real Estate Such A Mess?</h3>
"The seismic, pandemic-driven shift toward remote work has substantially pushed down demand for office space, approximately doubling the vacancy rate," writes a comptroller <a href="https://comptroller.nyc.gov/reports/spotlight-new-york-citys-office-market/#:~:text=Vacancy%20rates%20have%20roughly%20doubled,46%25%20of%20office%20space%20citywide.">report</a>.
New York's commercial real estate vacancy rate was a mere 6.4% in early 2020 &#8212; before the pandemic unfolded.
Pandemic disruptions were followed by decades-high interest rates which had a slashing effect on <a href="https://www.benzinga.com/money/best-reits">REITs</a>.
The trend isn&#8217;t exclusive to New York. 
Earlier this year, the U.S. vacancy rate for commercial real estate <a href="https://www.benzinga.com/real-estate/24/01/36707378/office-space-hits-highest-vacancy-rate-since-1979-heres-why-converting-it-to-residential-space-isnt">reached its highest levels since 1979</a>, at about 20%. By May, the rate had dropped to 17.8% as per a CommercialEdge <a href="https://www.commercialedge.com/blog/national-office-report/">report</a>.
A recent report by real estate firm Colliers found last month that there was <a href="https://www.benzinga.com/real-estate/24/06/39461452/manhattan-office-market-has-a-breakout-month-with-a-70-surge-in-leasing-activity">a 70% pick-up in leasing activity in New York City</a> as compared to last year. While this metric brings optimism for real estate investors, CommercialEdge argues that the remote and hybrid work trends are here to stay, and vacancies will likely remain flat across the country.
ETFs following the real estate sector haven&#8217;t performed well as of late. Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), the biggest one by assets under management, was up 0.2% on Wednesday, having lost 3.8% in the past six months.
Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) shows a similar trajectory, up 0.3% on Wednesday at the time of this writing and down 2.7% since in the past six months.
Residential real estate continues to struggle from high interest rates, with the affordability of buying a home <a href="https://www.benzinga.com/economics/macro-economic-events/24/07/39614880/now-owning-a-house-in-us-is-more-challenging-than-ever-as-affordability-drops-to-">reaching its lowest level in 17 years last week</a>.
Now Read:&nbsp;
<ul>
<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/06/39482229/home-prices-reach-new-record-highs-yet-signs-of-normalization-emerge">Home Prices Reach New Record Highs, Yet &#8216;Signs Of Normalization&#8217; Emerge</a></li>
</ul>
Manhattan Skyline, including the Continental Center on the left, by Szilas on Wikimedia Commons.

Asset Sales

General

'Apocalyptic' Manhattan Real Estate Deals Keep Coming — Sector Mayhem Or Investment Opportunity?

With the median American tenant paying $2,147 in rent, according to Zillow data, residents are desperately hoping for a drop in rent prices that could come if <a href="https://www.benzinga.com/real-estate">home vacancies rise</a>.
As per U.S. census data, more than half of U.S. renters pay over 30% of their income in rent, crossing the line where rental units stop being considered affordable.
The situation is prompting renters to <a href="https://www.benzinga.com/real-estate/24/06/39161182/renters-are-staying-longer-amid-rising-housing-costs-and-high-mortgage-rates">remain in their rental units</a> for extended periods, aiming to minimize rent increases. This trend is also a result of historically high mortgage rates, which are deterring tenants from securing loans for their first homes.
The measures, however, change drastically depending on the location. New York City continues to be one of the less affordable locations for tenants, with workers that earn as much as $135,000 a year still <a href="https://www.benzinga.com/real-estate/24/05/39091231/rents-are-so-high-in-new-york-city-that-even-135kyear-tech-workers-cant-keep-up">unable to afford 65% of the city's available properties</a>.
In California, <a href="https://www.benzinga.com/real-estate/24/05/39087152/national-rental-rates-climb-1-2-in-may-breaking-20-month-streak">large cities are seeing a decline in annual rental rates</a>. Annually, Oakland was down 9.1%, Sacramento dropped 8.1% and Los Angeles declined 5%.
Read also: <a href="https://www.benzinga.com//node/39040957">US Home Prices Hit All-Time Highs, Fastest Growth Rate In A Year: &#8216;We&#8217;ve Witnessed Records Repeatedly Break&#8217;</a>
<h3 class="wp-block-heading">Will Rents Cool Down?</h3>
The vacancy rate is a key measure to look at when trying to assess the course of rental prices.
A higher number of vacant homes puts pressure on landlords to drop prices in order to find tenants for their empty properties.
According to data from the St. Louis Fed, vacancies across the country during the first quarter of 2024 came in at a rate of 6.6%, the same as the two previous quarters and higher than any other period since mid-2021.
This measure is higher than the annual averages for 2020, 2021, 2022 and 2023.
While vacancies across the country have not declined in recent months, they remain below the historical national average, which has been 7.3% since 1956.
The level of vacancies varies greatly between states.
"Western and Northeastern states have the lowest rental vacancy rates in the country, accounting for 14 out of 15 states with the lowest vacancy rates—all of which have rental vacancy rates of 4.9% or lower," according to a Monday <a href="https://constructioncoverage.com/research/cities-with-the-highest-rental-vacancy-rates">report</a> by Construction Coverage, which looked at the most recent data on housing vacancies and rent prices across the country.
The highest vacancy rates are in Southern and Midwestern states, where 14 of the 15 states with the highest rental vacancy rates are located.
A rise in construction could help bring rent prices down since the market is injected with new supply of available homes, which increase vacancies.
Housing starts, a measure that looks at how many projects began construction in a given period of time, saw a slight uptick in April, but 2023 and 2022 averages were below 2021 levels and this year doesn't look to be leading up to breaking recent records.
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/39007410/when-will-the-fed-cut-interest-rates-were-in-the-middle-of-the-road-path-of-cutting">If the Fed begins cutting down interest rates</a> this year, more tenants would leave their contracts for a first home, increasing the number of vacant properties.
Arkansas, Indiana, South Carolina, Alabama and Texas are the states with the highest rate of vacant homes, all above 9%.
Massachusetts, Maine, New Jersey, Vermont and Kentucky have the lowest rate of vacancies, all at 3.5% or below.
Median rent prices have shown an uptick this year so far, as per Zillow, after a drop that lasted the entire second half of 2023. Prices could start to cool down again if vacancies continue to grow or remain higher than in previous years.
The largest ETFs following the real estate sector are Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) and Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>).
Now read: <a href="https://www.benzinga.com//node/39100910">Home Sellers Slashing Prices At Fastest Rate In Nearly Two Years: What&#8217;s Going On?</a>
Image generated using artificial intelligence via Midjourney.

Will Rent Prices Finally Cool Down? Key Indicator Offers Hope, But Major Cities Remain Unaffordable

The European Central Bank is universally <a href="https://www.benzinga.com//node/39029946">expected to cut interest rates for the Euro area this week</a>.
Cutting back on interest rates for the first time in two decades can be seen as a positive sign for the dwindling European economy, which has been hit by slow growth and poor demographic patterns.
Average inflation in Euro area countries has been mostly on a downward trend since last year, reaching an annual 2.4% in both March and April, down from a peak of 10.6% in October 2022.
The measure, however, is very dynamic within the block, with figures as low as 0.4% for Lithuania and as high as 4.9% in Belgium.
The ECB commenced its latest rate hike cycle in July 2022. Key ECB interest rates, the European counterpart for the federal funds rate, was hiked a total of 10 times and now stands at 4%. The same rate has been kept steady since September of last year.
June's cut will bring the rate down by 25 basis points to a floor of 3.75%.
Yet the steady pace towards the ideal measure of 2% annual inflation might be hitting a roadblock this month, as Eurostat, the block's main statistics office, is estimatfing that May's inflation has gone up to 2.6%, above estimates of 2.5%.
If the measure is confirmed, it won&#8217;t interfere with plans to lower interest rates. It might influence a decision by the ECB to pause rates during July and slow the speed of rate cuts down the line.
Bloomberg Economics has <a href="https://www.bloomberg.com/news/articles/2024-06-01/central-banks-latest-world-rate-paths-set-to-diverge-with-ecb-s-first-cut?sref=TBDibEcD">forecast</a> a pause in July and further cuts in September, October and December.
Read Also: <a href="https://www.benzinga.com/news/24/05/38951699/eu-approves-3-5b-in-frozen-russian-assets-for-ukraine-janet-yellen-has-a-plan-to-increase-amount-by">EU Approves $3.5B In Frozen Russian Assets For Ukraine: Janet Yellen Has A Plan To Increase Amount By Over 10X</a>
<h3 class="wp-block-heading">What This Means For US</h3>
Timing for the EU's latest inflationary cycle is in line with the U.S.'s wave of price increases. Both territories have been subject to the same variables. Energy prices, for example, are affected by the Ukraine/Russia war.
Yet the block's inflation is easing faster than in the U.S.
<a href="https://www.benzinga.com/markets/equities/24/05/38842603/us-inflation-falls-as-expected-in-april-bolsters-fed-rate-cut-bets">Yearly U.S. inflation was 3.4% in April</a>, down from 3.5% in March. 
On Friday, the Fed's preferred measure for inflation, the Personal Consumption Expenditure, was released for the month of April, showing <a href="https://www.benzinga.com/economics/macro-economic-events/24/05/39110198/feds-preferred-inflation-gauge-matches-estimates-personal-income-spending-slow-mo">a steady course, with a 2.7% annual rise as compared to the previous year</a>.
In a Monday interview, Minneapolis Fed President Neel Kashkari advocated for maintaining the current Fed funds rate in the U.S. for a longer period <a href="https://www.benzinga.com/24/06/39131539/feds-neel-kashkari-advocates-for-no-interest-rate-cut-until-we-get-a-lot-more-data-to-convince-us-am">to avoid the risk of jeopardizing U.S. economic prosperity</a>.
The EU's decision will further widen the gap with the cost of borrowing in the U.S., where the federal funds rate now stands at between 5.25% and 5.5%.
Canada is also expected to slash rates this week, in a decision to be confirmed on Wednesday, also widening the gap of borrowing cost across the Northern border, putting further pressure on the Fed to begin slashing rates sooner rather than later.
Canada's annual inflation rate also shows a better trajectory than its American counterpart, having dropped to 2.7% in April, down from 2.9% in March.
An upcoming <a href="https://www.benzinga.com/topic/jobs-report">jobs report</a> this Friday will further inform the Fed in its upcoming decisions. Economists are estimating the creation of 190,000 jobs in May.
<h3 class="wp-block-heading">Stocks And Other Assets To Watch </h3>
Fixed-income securities like government bonds tend to go up as interest rates are slashed.
Their prices will likely be affected by expectations around upcoming rate cuts in the U.S.
Last week, Bank of America chief investment strategist Michael Hartnett said <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/39116124/bank-of-america-strategist-shifts-to-bonds-stock-sell-off-prophecy-on-benign-inflat">he's bullish on bonds for the second half of the year as expectations</a> on rate cuts grow and may even become realized.
He said to "buy any dip in bond prices," while recommending to "sell the first cut" for stocks.
While there are many ways to <a href="https://www.benzinga.com/money/how-to-buy-bonds">buy government bonds</a>, investors can also access the bond market by purchasing bond ETFs like iShares Core US Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>) and Vanguard Total Bond Market Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BND#NASDAQ">BND</a>).
<h3 class="wp-block-heading">Real Estate</h3>
The real estate market has been <a href="https://www.benzinga.com//node/39110330">one of the worst hit by the recent wave of rate increases</a>, as the cost of borrowing for both commercial and personal building and renovation has skyrocketed.
Expectations on rate cuts could turn out to be a lifeline for the sector, which is covered by ETFs like Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) and Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>).
Now read: <a href="https://www.benzinga.com//node/38934737">EU Enacts World&#8217;s First AI Regulation, First Compliance Trigger Will Aim To Tackle AI Systems That Pose &#8216;Unacceptable&#8217; Risk</a>
Shutterstock image.

Eurozone

Pressure Mounts On Fed As Eurozone, Canada Plan Interest Rate Cuts This Week

In April, inflationary pressures showed signs of easing, with the Consumer Price Index (CPI) on a &quot;core&quot; basis rising 3.6% year over year, in line with expectations. This marked a cooling from the 3.8% increase observed in March. Monthly core price increases also aligned with expectations at 0.3%, down from 0.4% in the previous three months.
In April, inflationary pressures showed signs of easing, with the Consumer Price Index&nbsp;on a &quot;core&quot; basis rising 3.6% year over year, in line with expectations. This marked a cooling from the 3.8% increase observed in March. Monthly core price increases also aligned with expectations at 0.3%, down from 0.4% in the previous three months.
Despite the moderation in inflation, analysts suggest that the Federal Reserve is unlikely to rush into cutting interest rates. Bank of America Securities economist Stephen Juneau stated that while the April data is a positive step, it may not be sufficient to prompt significant action from the Fed just yet, as quoted on Yahoo Finance. Fed Chair Jerome Powell emphasized the need for sustained data before making any decisions regarding interest rates.
But then, retail sales in April remained unchanged, contrasting with a 0.6% increase in March and defying the 0.4% rise anticipated by economists, as reported by Bloomberg, quoted on Yahoo Finance. This unexpected stagnation in consumer spending indicates a possible shift in consumer behavior amidst persistent inflation and higher interest rates. This somber economic data might force the Fed to reconsider its tough stance on monetary policy in the near term.
<h3>Return of Fed Rate Cut Bets</h3>
We would like to note that following the CPI release, market expectations regarding rate cuts shifted slightly, with a modest increase in the probability of a rate cut in September according to the CME FedWatch Tool. Following the release of data, there was 52.7% chance of a 25-bps worth of September rate cut, down from 50.5% chance recorded a day earlier.
As of However, Powell suggested that the process of bringing inflation back down to the 2% target might take longer and could potentially be more challenging than anticipated. The U.S. benchmark treasury yield was 4.36% on May 15, 2024, down from 4.45% recorded a day earlier.
<h3>Sector ETFs to Win</h3>
Against this backdrop, below we highlight a few sectors and its ETFs that could perform better in the near term.
Technology &ndash; Technology Select Sector SPDR Fund (ARCA:XLK)
Tech companies, particularly those in growth phases, often rely on external financing to fund research and development, expand operations, and acquire other businesses. With chances of lower borrowing costs taking shape following softer inflation print, these companies can fund innovations with cheaper capital.
Technology stocks are often valued based on future earnings potential rather than current profitability. When interest rates are low, the discounted cash flow used to value these companies yield higher present values for future earnings. In a nutshell, the lower the rate, the higher the value of tech companies&#39; future cash flows. The fund added 2.3% on May 15.
Utilities &ndash; Utilities Select Sector SPDR Fund (ARCA:XLU)
The utilities sector is a rate sensitive sector as it requires huge infrastructure which places a massive debt burden and the resultant interest obligation on its operators. This leaves the sector with no scope of outperformance in a rising rate environment. As a result, a weak inflation print is good news for the utilities space. In any case, utilities stocks have been in great shape currently due to better demand-supply fundamentals. The fund, which added 1.5% on May 15, yields 3.04% annually.
Real Estate &ndash; Schwab U.S. REIT ETF (ARCA:SCHH)
This is yet another sector that performs well in a low-rate environment. These stocks often rely on borrowing to finance property acquisitions and developments. Low interest rates reduce the cost of this debt, which can enhance profitability and cash flow.
Moreover, since REITs pay higher dividends, lower interest rates can lead to better cash flows and potentially higher and more stable dividend payouts. This is an attractive phenomenon to income-focused investors. The fund, which gained 1.4% on May 15, yields 3.33% annually.
<a href="https://www.zacks.com/stock/news/2274551/3-sector-etfs-to-play-on-renewed-fed-rate-cut-hopes?cid=CS-BENZ-FT-etf_news_and_commentary-2274551">To read this article on Zacks.com click here.</a>

3 Sector ETFs to Play on Renewed Fed Rate Cut Hopes

The commercial real estate industry continues to reel from the impacts of remote work <a href="http://benzinga.com/analyst-ratings/analyst-color/24/04/38219988/economists-warn-feds-inflation-battle-could-trigger-recession-have-to-increase-the-">and escalating inflation.</a>
Elevated interest rates and a widespread trend toward reducing office space across various industries have left the sector facing unprecedented amounts of vacant office space.
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38273192/goldman-sachs-boasts-near-perfect-q1-results-5-analysts-zero-in-on-core-strengths">On an earnings call on Monday</a>, Goldman Sachs Group Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GS#NYSE">GS</a>) CEO David M. Solomon mentioned the poor state of commercial real estate as one of the main factors slowing U.S. growth, along with continuing concerns about inflation and escalating geopolitical tensions.
The sector has become especially sensitive to speculation around interest rates. Last month, a hint of rate cuts by the Fed <a href="https://www.benzinga.com/real-estate/reit/24/03/37882885/10-real-estate-stocks-move-on-thursday-fed-rate-cut-possibility-sparks-rally-for-troubled-sector">had several stocks and funds jump through the roof</a> in a show of volatility that's unknown to a sector normally praised for offering stability against riskier markets.
Just days later, S&amp;P Global Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPGI#NYSE">SPGI</a>) <a href="https://www.benzinga.com//node/37950136">decided to downgrade five regional banks</a> based on risks associated with the unstable commercial real estate market.
Operational shifts for big tech companies are partly fueling the commercial real estate slump. The change to remote or hybrid work, which has become the new status quo in the tech sector after the strike of COVID-19, has left many companies juggling more office space than they need.
That's added to a massive trend of layoffs which continued to be common practice in<a href="https://www.benzinga.com/markets/equities/24/01/36874447/tech-layoffs-up-over-300-month-over-month-in-january-3-companies-with-the-most-employees-laid-of"> the tech sector during the first quarter of 2024</a>, after a slight downtick during the second half of 2023.
Late last month, Amazon.com Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMZN#NASDAQ">AMZN</a>) said it plans to cut $1.3 billion <a href="https://www.benzinga.com/news/24/03/37983953/amazons-strategic-real-estate-plan-to-reduce-vacancy-rate-and-enhance-workspace-efficiency">by reducing office space and ending leases early</a>. The tech behemoth faces a 33.8% vacancy rate in its offices after laying off over 27,000 employees in 2022 and 2023.
According to a Wall Street Journal <a href="https://www.wsj.com/real-estate/commercial/big-tech-is-downsizing-work-space-in-another-blow-to-office-real-estate-67b4685c?mod=hp_featst_pos3">report</a>, Alphabet Inc Class C (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>) (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOGL#NASDAQ">GOOGL</a>) is subleasing some of its Silicon Valley office space, while Meta Platforms Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/META#NASDAQ">META</a>) has reduced leases for its own office space. The Facebook owner has been slashing office space all around the globe this year, <a href="https://www.benzinga.com//node/37024306">including in locations like Singapore</a> and <a href="https://www.benzinga.com//node/34900681">London</a>. Meanwhile, Salesforce Inc's (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CRM#NYSE">CRM</a>) SEC filings show that the company is using half the office space it was using one year ago in the San Francisco area.
Read also: <a href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/24/04/38278182/powell-delays-fed-rate-cuts-we-need-greater-confidence-in-inflation-2-year-yields-spik">Powell Delays Fed Rate Cuts—&#8217;We Need Greater Confidence In Inflation&#8217;; 2-Year Yields Spike To 5%</a>
The pullback from tech is proving especially painful for the real estate sector when it adds losses from other common office-dwelling sectors, including law firms and financial companies.
By January, a Moody's Analytics report put the average<a href="https://www.benzinga.com/markets/equities/24/01/36542862/empty-spaces-us-office-vacancies-rise-to-highest-levels-in-four-decades"> vacant office space in large cities around the country at 19.6%</a>, the highest it's been since 1979.
Several cities are showcasing extreme levels of office vacancy these days, with San Francisco at a record of 36.7%, compared to just 3.6% before the pandemic. The void is more noticeable in cities associated with the tech industry, including Seattle, New York and Austin. In Seattle, office property transactions <a href="https://www.benzinga.com/news/financing/24/02/37134484/seattles-office-space-dives-98-7-dip-reflects-tech-storm-hybrid-shifts">declined in 2023 a staggering 98.7% year-over-year</a> after almost 45,000 employees were laid off in the area.
On Wells Fargo &amp; Co&#8216;s (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/WFC#NYSE">WFC</a>)<a href="https://www.benzinga.com//node/38219378"> Q1 call last week,</a> CEO Charles W. Scharf said that commercial real estate revenue was down 7% from the previous year, impacted by lower loan demand in that sector.
Yet the executive added that the sector, which is primarily made up of office space, didn't experience significant changes when compared to the last quarter of 2023.
Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), by far the largest real estate ETF by assets under management, is down almost 11% since January, with a 5% drop in the last five days.
Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) and Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) present very similar trajectories.
However, it's not all bad news for investors in the space. Blackstone Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BX#NYSE">BX</a>) President Jon Gray recently said this could be the right time to<a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37719939/is-it-time-to-buy-the-commercial-real-estate-dip-the-worlds-biggest-private-equity-"> "buy the dip" on the real estate plunge</a>. The asset manager is optimistic about the long term future of commercial real estate when considering that the Fed will sooner or later have to reduce rates.
Once that happens, the diminished supply of new developments following this slowdown, combined with cheaper cost of borrowing, could kickstart the industry upwards once more.
Now read: <a href="https://www.benzinga.com/markets/equities/24/04/38277243/stocks-grapple-with-geopolitical-pressures-gold-eyes-2-400-bitcoin-falls-below-62-000-whats-driv">Stocks Grapple With Geopolitical Pressures, Gold Eyes $2,400, Bitcoin Falls Below $62,000: What&#8217;s Driving Markets Tuesday?</a>
Image generated using artificial intelligence via Midjourney.

Specialty ETFs

Tech

AMZN

GOOG

GOOGL

SPGI

Tech Layoffs, Remote Work Push Office Vacancies To 19.6%, Highest Since 1979

If you&#8217;re keen on placing a &#8220;For Sale&#8221; sign in front of your home, research suggests it&#8217;s a smart move.
April 14 through April 20 is &#8220;the best time to sell your home,&#8221; according to <a href="https://www.realtor.com/research/best-time-to-sell-2024/">data</a> from Realtor.com. It&#8217;s the &#8220;peak week nationally&#8221; for sellers to maximize return on investment, or ROI. 
Here&#8217;s why:
<ul>
<li>Mid-April listings get 22.8% more views</li>
<li>Homes sell at a 17% faster rate</li>
<li>Historically, home prices are 1.1% higher this week than the average week throughout the year</li>
<li>And, prices are 10.4% higher this week versus the start of the year.</li>
<li>The national median listing price could reach $7,400 above the average week, and $34,000 more than the start of the year.</li>
</ul>
See Also: <a href="https://www.benzinga.com/real-estate/24/04/38164522/biden-administration-announces-intent-to-add-500-000-starter-homes-to-americas-housing-inventory">Biden Administration To Add 500,000 Starter Homes To America&#8217;s Housing Inventory</a>
<h1 class="wp-block-heading">Not Yet Ready To Sell?</h1>
Don&#8217;t sweat if you&#8217;re not quite prepared to list your digs. Time is on your side. 
Realtor.com reports 53% of home sellers take one month or less to get their home ready to list. And, if you prep now, May and June are also opportune times.
That&#8217;s according to <a href="https://www.attomdata.com/news/market-trends/home-sales-prices/2023-best-days-of-the-year-to-sell-a-home-analysis/">ATTOM</a>, a real estate data provider. From April to June, seller premiums can be 10% or more above market value. 
And the top 16 best days to sell are actually in May, ATTOM claims.
<h1 class="wp-block-heading">When&#8217;s The Worst Time?</h1>
The three slowest months of the year are October, November and December, according to <a href="https://www.attomdata.com/news/market-trends/home-sales-prices/2023-best-days-of-the-year-to-sell-a-home-analysis/" target="_blank" rel="noreferrer noopener">ATTOM</a>.
And, coming out of the winter months, consumer perceptions of both homebuying and home-selling conditions are improving. Both measures have now risen multiple months in a row, the Federal National Mortgage Association (OTC:<a class="ticker" href="https://www.benzinga.com/stock/FNMA#OTC">FNMA</a>), also known as Fannie Mae, reported in March.
The most recent Fannie Mae Home Purchase Sentiment Index (HPSI) is up 10.6 points year over year.
"The housing market will continue to be characterized by high home prices, high financing costs, and a limited number of homes for sale," Bankrate chief financial analyst Greg McBride <a href="https://www.benzinga.com/opinion/24/03/37938028/exclusive-interest-rates-rode-the-elevator-up-but-analyst-predicts-theyll-take-the-stairs-coming-dow">told Benzinga last month</a>.
Rising home prices often reflect a healthy real estate market, which can boost the value of real estate assets held within certain exchange-traded funds (ETFs), such as: Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>); the Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>); the Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) and the iShares U.S. Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYR#NYSE">IYR</a>). 
Now Read: <a href="https://www.benzinga.com/news/24/03/37775181/is-trumps-son-in-law-the-new-real-estate-mogul-jared-kushner-commits-500m-to-serbian-project-that-ca">Is Trump&#8217;s Son-In-Law The New Real Estate Mogul? Jared Kushner Commits $500M To Serbian Project That Caught Ex-President&#8217;s Fancy</a>
Photo: Shutterstock

FNMA

iShares Trust Dow Jones US Real Estate Fund Index

Is Your Home For Sale? It's 'Peak Week,' Researchers Say

The recent spike in national mortgage rates stirred concerns among homebuyers and economists alike. With the 30-year fixed-rate mortgage (FRM) climbing to 6.88% on April 11, questions arise about the trajectory of <a href="https://www.benzinga.com/real-estate">the housing market.</a>
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="874" height="644" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/11122010/Screenshot-2024-04-11-at-9.49.14-PM.png" alt="" class="wp-image-288021" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/11122010/Screenshot-2024-04-11-at-9.49.14-PM.png 874w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/11122010/Screenshot-2024-04-11-at-9.49.14-PM-300x221.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/11122010/Screenshot-2024-04-11-at-9.49.14-PM-768x566.png 768w" sizes="(max-width: 874px) 100vw, 874px" /></figure>
Chart Source: Freddie Mac
Additionally, other key indicators such as the 15-year fixed mortgage rate, which rose to 6.16%, signaled a broader trend of rate hikes.
Also Read: <a href="https://www.benzinga.com/markets/equities/24/03/37855254/are-you-a-housing-market-lock-in-high-mortgage-rates-result-in-people-not-living-in-homes-they-w">Are You A Housing Market Lock-In? High Mortgage Rates Result In &#8216;People Not Living In Homes They Would Prefer&#8217;</a>
<h1 class="wp-block-heading">Stubborn Inflation And The Fed To Blame</h1>
Per <a href="https://www.freddiemac.com/pmms">Freddie Mac</a>, mortgage rates have gradually increased through the year, due to persistent inflation and the reassessment of the Federal Reserve&#8217;s monetary policy trajectory. 
The latest inflation figures from March indicate minimal change, but the financial market&#8217;s response presents a contrasting economic outlook. The March estimate of 3.5% annual inflation growth fell within the range of 3.1% to 3.7%, while the Dow Jones Industrial Average experienced a significant decrease following the announcement. This is reminiscent of the unmet expectations of a recession from a year prior.
<h1 class="wp-block-heading">Worst Day For Mortgage Rates Since October 2022</h1>
On April 10, the average lender experienced a mortgage rate hike by 0.28%, almost equivalent to the 0.29% rise observed after the Feb. 2 jobs report. Mortgage News Daily <a href="https://www.mortgagenewsdaily.com/markets/mortgage-rates-04102024">described</a> this as &#8220;basically the worst day for mortgage rates since October 2022.&#8221;
Many analysts anticipated mortgage rates to drop below 7% in the current year. However, persistent inflation figures prevent rates from reaching the desired lower levels.
<h1 class="wp-block-heading">McBride&#8217;s Musings: An Expert&#8217;s Take</h1>
Greg McBride, CFA, chief financial analyst for Bankrate, said the uncertainty persists regarding whether the current inflationary trend is temporary or posed a substantial threat to the progress made in reducing inflation in 2023. He suggested that until there was a clearer consensus on the trajectory of inflation, it would be challenging for mortgage rates to significantly and consistently decline below 7 percent.
Despite hopes for rates to dip below 7%, stubborn inflation numbers thwart expectations, posing challenges for prospective homebuyers and the housing market as a whole. 
"The housing market will continue to be characterized by high home prices, high financing costs, and a limited number of homes for sale," McBride told Benzinga in <a href="https://www.benzinga.com/opinion/24/03/37938028/exclusive-interest-rates-rode-the-elevator-up-but-analyst-predicts-theyll-take-the-stairs-coming-dow">an exclusive interview</a>.
This might spell good news for those invested in the Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), the Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>), the Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) and the iShares U.S. Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYR#NYSE">IYR</a>). Rising home prices often reflect a healthy real estate market, which can boost the value of real estate assets held within these ETFs.
However, investors in mortgage ETFs such as the&nbsp;iShares MBS ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MBB#NYSE">MBB</a>) and the&nbsp;Vanguard Mortgage-Backed Securities Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VMBS#NYSE">VMBS</a>) may want to remain wary of their holdings.
<h1 class="wp-block-heading">The Affordability Abyss</h1>
As experts weigh in on the implications of these developments, the affordability crisis deepens, compounded by limited housing inventory and stagnant wage growth. While navigating this landscape, the question is: are we witnessing the beginning of a sustained upward trend in mortgage rates?
Read Next: <a href="EXCLUSIVE: Interest Rates Rode The Elevator Up, But Analyst Predicts They'll Take 'The Stairs Coming Down'">EXCLUSIVE: Interest Rates Rode The Elevator Up, But Analyst Predicts They&#8217;ll Take &#8216;The Stairs Coming Down&#8217;</a>
Photo: Shutterstock

Will Mortgage Rates Pop Again? Homebuyers Combat An Affordability Crises

U.S. government debt is reaching unsustainable levels, and the latest analysis points to an even<a href="https://www.benzinga.com/news/treasuries/24/02/37227285/government-debt-exceeds-120-of-gdp-why-former-imf-economist-very-worried-about-us-fiscal-crisis"> more concerning future.</a>
A new economic model developed by Bloomberg Economics predicts that in 88% of scenarios, U.S. debt as a percentage of GDP will rise in the coming 10 years.
In a Monday letter to investors, Citadel founder Ken Griffin <a href="https://www.benzinga.com/economics/macro-economic-events/24/04/38039631/ken-griffin-slams-irresponsible-us-deficit-we-must-stop-borrowing-at-the-expense-">referred to mounting national debt as a significant issue</a>, saying that &#8220;we must stop borrowing at the expense of future generations.&#8221;
According to a recent survey, about 85% of Americans worry that current debt levels <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/02/37324835/ticking-time-bomb-over-85-of-americans-fear-national-debt-crisis-impact-on-their-fu">could have a negative impact in their future</a>.
Official data from the St. Louis Fed shows that debt equaled 121% of the country&#8217;s GDP in the last quarter of 2023. The rate has floated around 120% in past years, after peaking at 132% during the COVID pandemic. These levels are above a previous historical record set following World War II.
In late May 2023, <a href="https://www.benzinga.com/news/23/06/32704441/biden-signs-debt-ceiling-bill-to-avert-government-default">the government averted a default by raising the debt limit even higher</a> in an emergency measure. While lawmakers on both sides of the aisle agree that government borrowing has reached unhealthy levels, a lack of agreement as to how to solve the problem keeps Congress from finding a satisfactory solution.
Earlier this year Fed Chair Jerome Powell said that the current rate of debt acquisition <a href="https://www.benzinga.com/startups/24/02/37156426/jerome-powell-says-34-trillion-national-debt-is-ready-for-an-adult-conversation-janet-yellen-calls-s">means we're ​​&#8221;borrowing from future generations,"</a> and called for elected officials to have an adult conversation "about getting the federal government back on a sustainable fiscal path.&#8221;
With <a href="https://www.benzinga.com/general/24/03/37851477/u-s-national-debt-has-increased-by-nearly-8-5-billion-per-day-over-the-past-year">national debt increasing by an average of $8.5 billion a day during the past year</a>, Republicans generally argue for spending cuts, while Democrats point towards problems in tax revenue and high interest rates as the causes behind the rising fiscal deficit.
A recent budget proposal by President Joe Biden is aimed at reducing the federal deficit by $3 trillion in the next decade <a href="https://www.benzinga.com/24/03/37603424/bidens-budget-aims-to-slash-us-deficit-by-3-trillion-next-decade-through-higher-taxes-on-wealthy-big">by raising taxes on wealthy individuals and corporations</a>.
Where To Find Safe Haven: Bank of America chief strategist Michael Hartnett recently linked a rise in <a href="https://www.benzinga.com/money/how-to-invest-in-gold">gold</a> and Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) with rising concerns over debt, as investors look for hedges against a possible debt-led crises affecting the U.S. economy.
As opposed to the U.S. dollar, which can be emitted to infinity by printing new cash, both Bitcoin and gold have a cap on their supply, making them safer assets to store value in times of economic volatility.
Also read: <a href="https://www.benzinga.com//node/37227285">Government Debt Exceeds 120% Of GDP: Why Former IMF Economist &#8216;Very Worried&#8217; About US Fiscal Crisis</a>
SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>), the largest ETF following the gold market by total assets, has gained over 23% in the last six months. Other gold ETFs, including iShares Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IAU#NYSE">IAU</a>) and Abrdn Physical Gold Shares ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SGOL#NYSE">SGOL</a>) follow a similar trajectory.
<a href="https://www.benzinga.com//node/38053974">Bitcoin has hit a slump this week,</a> losing 5% of its value at the time of writing on Tuesday, yet the cryptocurrency has been enjoying a rally in recent months.
When concerns about national debt dominate the news, investors typically seek assets known for retaining value. With the debt ceiling suspension set to last until Jan. 1, 2025, Congress is likely to face another stand-off on debt issues following the <a href="https://www.benzinga.com/topic/2024-election">presidential election in November</a>, regardless of the winning candidate.
Real estate is another sector known to serve as a store of value, and investors can take part without the need to buy actual land. ETFs following the sector reflect its growth trends, with some of the largest being Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) and Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>).
ETFs following companies in Europe, Asia, Australia and other developed territories, also known as foreign asset ETFs, can also serve as a safe haven from U.S. volatility. Some of the largest include Vanguard Tax Managed Fund FTSE Developed Markets ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VEA#NYSE">VEA</a>) as well as iShares Core MSCI EAFE ETF (BATS:<a class="ticker" href="https://www.benzinga.com/stock/IEFA#BATS">IEFA</a>).
The new <a href="https://www.bloomberg.com/news/articles/2024-04-01/us-government-debt-risk-a-million-simulations-show-danger-ahead?srnd=homepage-europe&amp;sref=TBDibEcD">report</a> by Bloomberg Economics executed one million simulations tinkering with several variables in order to encompass the widest possible range of future scenarios. In 88% of the scenarios, the debt ratio went up between now and 2034, making the path of U.S. government debt unsustainable.
Bloomberg's team started its analysis by setting off from projections published by the Congressional Budget Office, which warned earlier this year that the fiscal deficit is spinning out of control, even when assuming that inflation will stabilize at 2% and the<a href="https://www.benzinga.com//node/38021818"> Fed will drop interest rates</a>.
The firm used a computational analysis which created a model using "market pricing for future interest rates and data on the maturity profile of bonds," and its results surpassed Congress' predictions, taking U.S. debt into new records over the coming decade.
Now read: <a href="https://www.benzinga.com//node/37839953">Elon Musk Calls For &#8216;Strong-Willed President&#8217; After GOP Rep Warns &#8216;Economic Catastrophe Must Happen&#8217; Before Congress Gets Serious About &#8216;Out-Of-Control Spending&#8217;</a>
Photo: Shutterstock

Macro Economic Events

$BTC

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SGOL

National Debt Drama Deepens: Where To Stash Your Cash When The Fiscal Sky Falls

Interest rates are on everyone&#8217;s radar, but what&#8217;s the game plan amid the Federal Reserve&#8217;s decision to hold <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37900527/federal-reserve-pushes-stocks-to-record-highs-as-rate-cuts-loom-nvidia-rallies-appl">steady for now</a>? 
Benzinga interviewed Greg McBride, CFA, Senior Vice President of Bankrate, for his exclusive insights on the current state of the economy and his expectations with the future.
Related: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37900527/federal-reserve-pushes-stocks-to-record-highs-as-rate-cuts-loom-nvidia-rallies-appl">Federal Reserve Pushes Stocks To Record Highs As Rate Cuts Loom, Nvidia Rallies, Apple Faces Legal Woes: This Week In The Markets</a>
<h2 class="wp-block-heading">Interest Rates May Take The Stairs Coming Down</h2>
McBride offered some very actionable insights. In response to a question about the Fed keeping interest rates unchanged this time, McBride said, &#8220;Interest rates took the elevator going up, but they're going to take the stairs coming down.&#8221; 
Per McBride, savers can capitalize on potentially lucrative returns that outpace inflation, from savings accounts, money markets, and CDs, provided they shop around for optimal deals. For borrowers, the mantra remains clear: prioritize slashing high-cost credit card debt.
His advice? &#8220;Always make at least your minimum payment on time – you can always pay more later.&#8221; It&#8217;s about dodging those pesky overdraft fees and late charges.
<h2 class="wp-block-heading">Real Estate Enthusiasts, Brace Yourselves</h2>
McBride&#8217;s forecast suggests a seller&#8217;s market, with limited inventory dictating terms. And falling mortgage rates? They might not spell relief as home prices continue their upward trajectory. &#8220;The housing market will continue to be characterized by high home prices, high financing costs, and a limited number of homes for sale,&#8221; said McBride.
This should be good news for those invested in the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), the Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>), the Real Estate Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) or the iShares U.S. Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYR#NYSE">IYR</a>). Rising home prices often reflect a healthy real estate market, which can boost the value of real estate assets held within these ETFs.
Investors in mortgage ETFs such as the iShares MBS ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MBB#NYSE">MBB</a>) and the Vanguard Mortgage-Backed Securities ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VMBS#NYSE">VMBS</a>) may see a mixed impact.
Rising home prices can increase the value of mortgage-backed securities (MBS) held within mortgage ETFs. This appreciation can lead to higher returns for investors holding these ETFs. However, higher home prices also make it more challenging for potential homebuyers to afford properties and/or to refinance their existing mortgages, potentially leading to decreased demand for mortgages.
Also Read: <a href="https://www.benzinga.com/real-estate/reit/24/03/37882885/10-real-estate-stocks-move-on-thursday-fed-rate-cut-possibility-sparks-rally-for-troubled-sector">10 Real Estate Stocks Move On Thursday: Fed Rate Cut Possibility Sparks Rally For Troubled Sector</a>
<h2 class="wp-block-heading">Legislative Acts May Sway Sentiment, Let Diversified ETFs Steer Your Ship</h2>
When questioned on legislative juggernauts like the CHIPS Act and Infrastructure Act that promise economic shifts, McBride&#8217;s advice is refreshingly pragmatic: &#8220;Investors are best served building a low-cost, well-diversified portfolio.&#8221; Forget chasing fleeting trends; it&#8217;s consistency that builds wealth, he says.
Exchange-traded funds are a low-cost, diversified way to gain exposure and build wealth consistently. The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), the iShares Core S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IVV#NYSE">IVV</a>) and the Vanguard S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOO#NYSE">VOO</a>) are the most popular and largest ETFs for U.S. equity exposure.
When asked about legislative acts impacting consumer sentiment and spending behavior, McBride said, &#8220;When Americans have jobs and paychecks coming in, the money gets spent.&#8221; Legislative acts may sway sentiment, but economic fundamentals steer the ship.
Read Next: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37922752/value-growth-stocks-trade-at-record-highs-but-long-term-leadership-lies-with-one-an">Value, Growth Stocks Trade At Record Highs But Long-Term Leadership Lies With One: Analyst</a>
Image created using artificial intelligence with DALL-E.

Opinion

Exclusives

Interview

EXCLUSIVE: Interest Rates Rode The Elevator Up, But Analyst Predicts They'll Take 'The Stairs Coming Down'

According to Rich Hill, head of Real Estate Strategy at Cohen &amp; Steers Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CNS#NYSE">CNS</a>), the REIT sector is on the brink of a significant upswing in 2024. Hill points to a confluence of factors that are set to propel growth beyond historical averages, with the declining trend in both nominal and real interest rates playing a pivotal role in boosting <a href="http://benzinga.com/real-estate/reit">the sector&#8217;s performance</a>.
In a Wednesday <a href="http://cnbc.com/video/2023/12/27/2024-will-mark-an-inflection-point-in-real-estate-investing-cohen-steers-rich-hill.html">appearance</a> on CNBC's ‘Squawk Box,' Hill expanded on these views, discussing the real estate landscape for 2024, the impact of interest rates on REITs, and other key factors influencing the sector.
 The current environment, characterized by improving credit markets and tightening credit spreads, further fortifies the outlook for REITs as attractive investment vehicles.
Real estate tracking ETFs: the&nbsp;Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) the&nbsp;CharlesSchwab U.S. REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>), the&nbsp;Real Estate Select Sector SPDR ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) and the iShares US Real Estate ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYR#NYSE">IYR</a>) are popular ways to get exposure to the real estate sector.
Also Read: <a href="https://www.benzinga.com/trading-ideas/long-ideas/23/12/36350537/winter-is-coming-but-the-housing-market-is-thawing-3-indicators-suggest-2024-momentum-is">Winter Is Coming, But The Housing Market Is Thawing: 3 Indicators Suggest 2024 Momentum Is Building</a>
<h2 class="wp-block-heading">Declining Interest Rates As A Cornerstone</h2>
The recent robust performance in the REIT sector can be attributed to the pivotal role played by declining interest rates. As nominal and real interest rates continue to trend downward in 2024, REITs stand to benefit from lower financing costs, making their yields more compelling to investors.
This trend not only enhances the appeal of existing REIT holdings but also stimulates demand for new investments within the sector. The persistently low interest rate environment is expected to continue into 2024, providing a favorable backdrop for sustained REIT growth.
<h2 class="wp-block-heading">Credit Markets and Tightening Spreads</h2>
A critical factor supporting the REIT sector&#8217;s positive trajectory in 2024 is the improvement in credit markets and the tightening of credit spreads. The favorable conditions in credit markets contribute to increased accessibility to capital for REITs, enabling them to pursue strategic acquisitions, development projects, and other value-enhancing initiatives.
The tightening of credit spreads is indicative of reduced credit risk, reinforcing investor confidence in the sector. As credit markets continue to show signs of strength, REITs are positioned to capitalize on these favorable conditions, driving performance beyond historical averages.
<h2 class="wp-block-heading">Office REIT Dynamics</h2>
Valuations within the Office REIT sector have experienced a dip, prompting investors to scrutinize the evolving office environment more closely. Rich, in his analysis, unpacks the nuances of this dynamic landscape, providing valuable insights that serve as a guide for investors navigating the complexities of the Office REIT sector. 
As remote work trends reshape traditional office dynamics, the sector is presented with both challenges and opportunities. Understanding these dynamics is crucial for crafting a nuanced investment strategy within the broader REIT landscape.
The 2024 outlook for the REIT sector is characterized by a favorable confluence of factors, including declining interest rates, improving credit markets, and the evolving dynamics within the Office REIT segment.
Alexandria Real Estate Equities Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ARE#NYSE">ARE</a>), Boston Properties Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BXP#NYSE">BXP</a>) and Cousins Properties Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CUZ#NYSE">CUZ</a>) are 3 popular ways to get exposure to the Office REIT space.
Investors who are well-positioned to leverage these trends might find opportunities for growth that potentially exceed historical averages. As the market adjusts to evolving economic conditions, a knowledgeable and flexible strategy in REIT investments could offer considerable returns for astute investors in the upcoming year.
Now Read: <a href="https://www.benzinga.com/etfs/sector-etfs/23/12/36396097/fannie-maes-2024-outlook-housing-market-navigates-challenges-with-emerging-resilience">Fannie Mae&#8217;s 2024 Outlook: Housing Market Navigates Challenges With Emerging Resilience</a>
Photo: Shutterstock

How Interest Rates Could Impact REITs In 2024 — Cohen & Steers' Rich Hill Weighs In

Federal National Mortgage Association (OTCQB:<a class="ticker" href="https://www.benzinga.com/stock/FNMA#OTCQB">FNMA</a>), commonly known as Fannie Mae, expects the U.S. economy <a href="https://www.benzinga.com/news/large-cap/23/12/36366903/is-lower-inflation-a-green-light-for-2024-interest-rate-cuts-markets-are-ending-the-year-surprised">to decelerate next year.</a>
They forecast GDP to decline slightly in 2024 by 0.3%, followed by 1.7% growth in 2025. In the housing sector, challenges are anticipated to maintain existing home sales at their lowest rate since the Great Financial Crisis. It&#8217;s expected that home sales and mortgage originations will start to recover slowly in 2024.
These forecasts were recently included in the <a href="http://fanniemae.com/research-and-insights/forecast/economic-developments-december-2023">outlook</a> presented by The Economic &amp; Strategic Research (ESR) Group at Fannie Mae.
The Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), the Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>), the Real Estate Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) and the iShares U.S. Real Estate ETF (IYR) are popular ways to get exposure to equity in the real estate sector.
<h2 class="wp-block-heading">Housing Market&#8217;s Pivotal Transformation</h2>
The housing market in 2024 is expected to experience a significant yet gradual transformation. As the economy slows down, a steady recovery is likely to drive resilience in home sales and mortgage originations.
The prevailing challenges of affordability, lock-in effects, and a scarcity of available housing inventory have conspired to keep existing home sales at their slowest pace. However, against the odds, new home sales have displayed an unexpected resilience in the face of soaring mortgage rates, hinting at an imminent rebound. The recent dip in mortgage rates from their peak in October serves as a promising harbinger for increased sales, although rates remain relatively high on a YoY basis.
Also Read: <a href="https://www.benzinga.com/news/23/12/36395643/tesla-cybertruck-orders-roll-in-majority-buyers-flocking-to-this-option-public-tracker-reveals">Tesla Cybertruck Orders Roll In: Majority Buyers Flocking To This Option, Public Tracker Reveals</a>
<h2 class="wp-block-heading">Glimmer Of Optimism</h2>
Despite the headwinds, Fannie Mae does see reasons for optimism in their forecast. 
Total single-family mortgage originations are anticipated to grow from $1.5 trillion in 2023 to $1.9 trillion in 2024 and further to $2.3 trillion in 2025. This trajectory, fueled by home price appreciation and modest growth in refinance activity, underscores the market&#8217;s resilience and adaptability.
In 2024, the housing market is expected to witness a slow recovery, with total home sales marginally surpassing the figures of 2023. October&#8217;s nadir, with existing sales dropping to an annualized pace of 3.79 million, is likely to mark the trough. While the road to recovery may be gradual, the recent bounce in purchase mortgage applications, coupled with an anticipation of further moderation in mortgage rates, paints a picture of upward momentum.
Surprisingly robust, new home construction is expected to weather the economic downturn with only a slight decline. Homebuyers, acclimated to higher mortgage rates, coupled with the resilience of homebuilders offering concessions, contribute to this unexpected buoyancy. Despite a modest economic contraction, new home sales are projected to hold steady in 2024.
<h2 class="wp-block-heading">The Silver Lining</h2>
The forecasted decline in mortgage rates provides a silver lining, with the average FRM30 rate predicted to average 6.7% in 2024. The lowered interest rate environment contributes to a modest upward revision in existing home sales and new home sales forecasts, injecting a sense of cautious optimism into the market.
While the economic landscape may pose challenges, the housing market in 2024 appears set to navigate the waves of change with resilience. Investors, homebuyers, and industry stakeholders alike are encouraged to approach the year with a measured optimism, prepared to ride the currents of change in the housing market of 2024.
Now Read: <a href="https://www.benzinga.com/markets/equities/23/12/36394175/openai-ceo-sam-altman-wonders-about-interest-rates-when-capitalists-have-more-and-better-ideas-t">OpenAI CEO Sam Altman Wonders About Interest Rates When Capitalists Have &#8216;More And Better Ideas Than Ever Before&#8217;</a>
Photo: Shutterstock

Fannie Mae's 2024 Outlook: Housing Market Navigates Challenges With Emerging Resilience

As the year draws to a close, the housing market is showing promising signs of thawing after a prolonged freeze in 2023. A trifecta of factors — falling mortgage rates, a surge in new listings and a notable uptick in Redfin agent consultations — points to a potential resurgence in <a href="https://www.benzinga.com/real-estate">real estate activity</a>.
Real estate tracking ETFs: the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), the Charles Schwab U.S. REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>), the Real Estate Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) and iShares US Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYR#NYSE">IYR</a>) are up between 17%-20% since Nov. 1. 
With momentum building up in this sector as we head towards 2024, investors may want to consider these ETF picks for real estate exposure.
Also Read: <a href="https://www.benzinga.com/real-estate/23/12/36322903/housing-market-heats-up-nar-forecasts-13-5-surge-in-home-sales-for-2024">Housing Market Heats Up: NAR Forecasts 13.5% Surge In Home Sales For 2024</a>
<h2 class="wp-block-heading">Average Mortgage Rates Down To 6.64%</h2>
One of the key indicators of this shift is the decline in monthly mortgage payments. Average mortgage rates dropped to 6.64%, marking their lowest level since May and a significant decrease from the 8% peak in late October. 
The median U.S. monthly mortgage payment, standing at $2,472 in the four weeks ending Dec. 17, reflects a $264 reduction from the October peak, though still showing an 11% year-over-year increase. The Federal Reserve&#8217;s shift towards more interest-rate cuts has accelerated this decline, providing a glimmer of hope for a soft landing in the economy.
<h2 class="wp-block-heading">Double-Digit Rise In Homeowners Contacting Agents</h2>
A notable development is the increased inventory in the housing market. Redfin <a href="https://www.redfin.com/news/housing-market-update-declining-mortgage-rates-increase-new-listings/">reports</a> a double-digit annual rise in homeowners seeking assistance from real estate agents to sell their homes. Redfin agents and mortgage brokers are reporting that buyers are starting to act on lower rates.
Redfin Economic Research Lead Chen Zhao remains cautiously optimistic, stating that the recent economic data suggests that mortgage rates may have peaked. As buyers return from the holidays, they will find a more extensive selection of homes, and interest rates are expected to remain in the mid-6% range. Nevertheless, the Federal Reserve&#8217;s cautious stance leaves a possibility of rates inching back up.
<h2 class="wp-block-heading">New Listings Up 9% YoY</h2>
New listings are up by 9% compared to the previous year, marking the most significant annual increase since July 2021. The drop in mortgage rates, especially within the 3% to 4% range, has likely empowered homeowners to consider selling.
Despite a surge in mortgage-purchase applications, home sales have not yet fully rebounded. While applications have risen by 18% from their November low point, pending home sales are down by 7% year over year. However, it&#8217;s essential to consider the typical holiday season slowdown in the housing market.
Anecdotally, the drop in rates is already capturing the attention of prospective buyers, setting the stage for a potentially dynamic and reinvigorated housing market in 2024.
Now Read: <a href="https://www.benzinga.com/real-estate/reit/23/12/36326354/us-mortgage-rates-drop-to-6-month-low-a-turning-point-for-the-housing-market">US Mortgage Rates Drop To 6-Month Low: A Turning Point For The Housing Market?</a>
Photo: Shutterstock

Winter Is Coming, But The Housing Market Is Thawing: 3 Indicators Suggest 2024 Momentum Is Building

A recent verdict could change the way buyers and sellers interact <a href="https://www.benzinga.com/topic/housing-market">with the housing market</a>.
A federal jury in Missouri ruled Tuesday that the National Association of Realtors and other major real estate companies were guilty of conspiring to keep commission rates high in the real estate industry.
<a href="https://www.benzinga.com/mortgage-rates">With mortgage rates nearing 8%</a> and the market almost at a standstill, the decision is causing a stir across the real estate sector. However, it could benefit consumers by lowering commission costs.
What Happened: For decades, sales commissions for several brokerage-led industries, including stockbrokers and travel agents, have come down extensively or hit zero due to technological disruption. Yet, sales commissions for the real estate market continue to float between 5% and 6% — a rate that the federal jury deemed artificially inflated.
High commissions for real estate agents affect consumers. After all, the price of those commissions is passed down to the final price of a house. Sales brokers' fees are typically divided with the buyer's brokers.
After a two-week trial, the NAR, along with HomeServices of America, and Keller Williams were charged with $1.78 billion in damages to home sellers, for collusion to artificially inflate commissions.
HomeServices of America is the largest real estate company in the U.S. by number of closed transactions and is a subsidiary of Warren Buffet's Berkshire Hathaway (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BRK#NYSE">BRK</a>).
Under the current system, which can be challenged depending on the trials' final outcome, sellers are forced to pay high commissions to buyer's brokers, although technology now allows buyers to do much of the searches themselves. The plaintiffs included claims from over 260,000 home sellers in Missouri, Kansas and Illinois, who were unhappy with having to pay buyer broker's commissions, according to Reuters.
A NAR spokesperson said the group plans to appeal the decision in an effort to reduce damages. However, if the court chooses to apply anti-trust laws to the decision, the damages for the losing parties could reach north of $5 billion.
Other major players in the real estate industry were also defendants in the lawsuit, but were not included in the verdict since they settled before the trial. Re/Max Holdings (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/RMAX#NYSE">RMAX</a>) paid $55 million, while Anywhere Real Estate (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HOUS#NYSE">HOUS</a>) — parent company of Century 21 and Coldwell Banker — paid $83.5 million.
Also Read: <a href="https://www.benzinga.com/markets/penny-stocks/23/10/35199675/the-housing-market-has-become-a-national-crisis-according-to-one-investor">The Housing Market Has Become A &#8216;National Crisis&#8217; According To One Investor</a>
Why It Matters: The verdict may shift the way home buyers and sellers interact with each other. It may also tweak the roles that agents play in their transactions.
Today, multiple-listing services, which essentially work as a broker exchange for buyers and sellers, demand sellers to set in advance the amount they will pay a buyer's agent if the sale goes through, in order to publish their listing in the platform. This dynamic is regulated by the NAR.
That was a key issue in the lawsuit, where plaintiffs argued that the system in place keeps commissions high and makes it harder for buyers and sellers to negotiate prices. Commission prices are set by brokerages and do not necessarily reflect the prices that the market would pay for that service if able to choose.
The current system creates a misaligned incentive structure. Sellers who pay more commissions get more agents to show their property to buyers, while buyers' agents choose to show their clients properties based on the commission they will receive instead of focusing on finding the best product for their client.
An analyst from investment bank Keefe, Bruyette &amp; Woods, <a href="https://www.wsj.com/articles/burnett-v-national-association-of-realtors-lawsuit-real-estate-home-buyers-sellers-8c6466dd">told</a> the Wall Street Journal that "the lawsuits could lead to a 30% reduction in the $100 billion that Americans pay in real-estate commissions every year and push well over half of the almost 1.6 million agents out of the industry."
While no changes have been made so far, the federal judge leading the case could impose changes in how the brokerages set commissions, or directly push brokerages to change their model in fear of facing further liabilities.
If the rules are changed and sellers are barred from paying buyers' broker fees, then many buyers might choose to not go through an agent to buy their home, as they would have to pay for their fee themselves.
The whole way in which buyers' agents work might then change, offering specific services like negotiating prices or inspecting houses, instead of a fixed fee stemming from the entire transaction.
Stocks Affected: This week's verdict rattled the market for <a href="https://www.benzinga.com/real-estate">real estate services</a>, including many publicly traded players focused on providing agent services.
Tech real-estate marketplace company Zillow (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ZG#NASDAQ">ZG</a>) is down 9.7% since its closing price on Monday, a day before the jury's decision became known.
Compass Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/COMP#NYSE">COMP</a>) which employs approximately 28,000 agents, is down 7.6% since market close on Monday.
Redfin Corp (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/RDFN#NASDAQ">RDFN</a>) lost as much as 12% between Monday and Tuesday, but has corrected its losses throughout Wednesday and Thursday and is now up 2.2% since Monday at closing time.
Re/Max Holdings is down 1.16% since the market close on Monday.
Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) was not hard hit by the news. The fund is up almost 6% since the market close on Monday. Charles Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) and Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) are up roughly 6% since that date.
Next: <a href="https://www.benzinga.com/fintech/23/10/35503903/arrived-homes-ceo-ryan-frazier-becoming-a-landlord-100-at-a-time">Arrived Homes CEO Ryan Frazier: Becoming A Landlord $100 At A Time</a>
Shutterstock image.

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A Landmark Verdict Could Change How Much You Pay For Your Next House

Real estate investment trusts, or <a href="https://www.benzinga.com/money/what-are-reits">REITs, are generally considered defensive plays </a>because of their steady dividend streams even during times of market volatility. This sector could be slowly losing that appeal due to the potential ramification of rising interest rates on their debt servicing costs, hedge fund manager Jim Chanos suggested recently.
What Happened: Chanos shared his thoughts on REITs&nbsp;in response to a tweet by a user going by the Twitter handle @xdemarksthespot, who delved into the fundamentals of Medical Properties Trust, Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/mpw#NYSE">MPW</a>). Medical Properties Trust is a Birmingham, Alabama-based REIT, which invests in healthcare facilities. Its portfolio is spread across geographies, with 61% in the U.S., 21% in the U.K., 4% each in Australia and Switzerland, 3% in Germany, 1% in Spain, 3% in other countries and 3% in other non-country entities.
If the company were to refinance $11 billion of its debt at current market rates, which is about 400-600 basis points higher than its present weighted average interest rate, it would wipe away about $0.75 to $1.10, or 50-67% off its adjusted funds from operations guidance, the Twitter user said.
The fed funds rate against which most interest rates are benchmarked has been climbing steadily since March 2022, when the<a href="https://www.benzinga.com/news/22/03/26171227/federal-reserve-raises-interest-rates-for-first-time-since-2018-projects-5-more-hikes-in-2022"> Federal Reserve began raising rates</a> after keeping them at extremely accommodative levels since the outbreak of the COVID-19 pandemic.
See Also:<a href="https://www.benzinga.com/money/best-reits"> Best REITs To Buy</a>
Even without any rent reductions from its tenants over the next five years, the REIT&#39;s dividend &quot;would need to be massively reduced&quot; so that it can be covered by the company&rsquo;s cash flow, he said.
If Medical Properties Trust&rsquo;s debt is refinanced eventually, its non-interest AFFO needs to rise over 50% just to keep the AFFO from declining, the Twitter user said. &ldquo;They have a huge hole to fill by the time it does in order to maintain the dividend,&rdquo; he added.
Chanos Chimes In: Chanos extrapolated the risk Medical Properties Trust is facing to other REITs as well. Quote-tweeting the user&rsquo;s tweet thread, he said, &ldquo;This observation applies to many REIT&rsquo;s, that have very low debt service costs.&rdquo;
&ldquo;Leases renewing at lower rates, debt rolling at higher rates.&rdquo;
The Vanguard Real Estate Index Fund ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vnq#NYSE">VNQ</a>) ended Friday&rsquo;s session up 1.52% at $86.93, according to Benzinga Pro data. The Charles Schwabb US REIT ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/schh#NYSE">SCHH</a>) added 1.45% to $20.25.
Read Next:&nbsp;<a href="https://www.benzinga.com/real-estate/reit/22/12/30216101/these-five-reits-are-being-highlighted-by-analysts-as-investment-targets-in-2023">These Five REITs Are Being Highlighted By Analysts As Investment Targets In 2023</a>
Photo: <a href="https://www.flickr.com/photos/asiasociety/" id="yui_3_16_0_1_1655986632480_1296485" target="_blank" title="Go to Asia Society's photostream">Asia Society</a>&nbsp;on flickr

Short Sellers

Dividend Cut 'Effectively Unavoidable': Investing Legend Chanos Lends Megaphone To REIT Skeptic

When taking into account the challenges presented by the Federal Reserve&#39;s interest rate tightening cycle, the real estate sector and the related exchange traded funds have been alright in 2018.
The Vanguard Real Estate ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vnq#NYSE">VNQ</a>), the largest ETF dedicated to the sector, is up 1.7 percent year-to-date, well ahead of a 0.3 percent gain for the S&amp;P 500.
<h3>What Happened</h3>
VNQ and rival real estate ETFs could be part of the move <a href="https://www.benzinga.com/analyst-ratings/analyst-color/18/12/12827150/an-upgrade-for-a-defensive-sector#/null">to defensive sectors</a>, a trend that&#39;s becoming increasingly apparent amid elevated market volatility. Data suggest real estate ETFs can provide some refuge from volatility. On a year-to-date basis, VNQ&#39;s annualized volatility is 100 basis points below the S&amp;P 500&#39;s.
Real estate is among the defensive sectors <a href="https://newpublic.cfraresearch.com/">CFRA Research</a> recently upgraded. The research firm lifted its rating on the sector to Marketweight from Underweight.
<h3>Why It&#39;s Important</h3>
&ldquo;CFRA thinks the pace of interest rate increases over the next twelve months is likely to moderate along with inflation,&rdquo; said CFRA&#39;s Director of ETF &amp; Mutual Fund Research Todd Rosenbluth in a Monday note. &ldquo;The Federal Reserve is slated to raise the fed-funds rate once more this year, for its fourth rate hike in 2018, but the pace of rate hikes in 2019 will slow as the Fed becomes more data dependent.&rdquo;
The research firm has Buy or Strong Buy ratings on 20 domestic real estate stocks, or 31 percent of its coverage universe for that sector. Within the real estate investment trust space, industrial REITs are among the more appealing groups. VNQ allocates 6.4 percent of its weight to industrial REITs while the rival Schwab U.S. REIT ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/schh#NYSE">SCHH</a>) features a 9.5 percent industrial REIT allocation.
&ldquo;CFRA Equity Analyst Chris Kuiper, CFA thinks this REIT sub-industry benefits as the growth of e-commerce provides a supply-demand imbalance for the logistics space close to metropolitan centers,&rdquo; said Rosenbluth.
<h3>What&#39;s Next</h3>
VNQ has $30.1 billion in assets under management, making it more than six times larger than SCHH, but the Schwab ETF is slightly cheaper with an annual fee of 0.07 percent, or $7 on a $10,000 investment. VNQ charges 0.12 percent.
CFRA has Overweight ratings on both ETFs.
Related Links:
<a href="https://www.benzinga.com/trading-ideas/long-ideas/18/12/12813499/more-esg-etfs-are-here">New ESG ETFs</a>
<a href="https://www.benzinga.com/trading-ideas/long-ideas/18/12/12813428/cushing-enters-etf-space-with-mlp-related-sector-funds">A Quartet Of New MLP ETFs</a>

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