US real estate stocks have reached their lowest point relative to the S&P 500 in history. The ratio between the iShares US Real Estate ETF and the SPDR S&P 500 ETF has fallen to 0.122, erasing all gains accumulated since before the 2007 housing bubble. This decline represents a 73% drop from the peak observed in February 2007.
Rising financing costs are pressuring the sector. According to Freddie Mac, the average 30-year fixed mortgage rate reached 7.28% on October 1, marking the highest level since November 2023. Additionally, the 10-year Treasury yield has climbed above 5%, offering investors income alternatives that do not carry the specific risks associated with property investment.
Market analysts offer varying perspectives on the sector's future. Charlie Bilello of Creative Planning noted that the current trend reflects the broader market outperforming real estate over nearly two decades. Peter Schiff of Euro Pacific Asset Management characterized the industry as struggling due to the reversal of government support and the era of declining mortgage rates.
