Source: Zhitong Finance
Real estate stocks became the second-best performing sector in the S&P 500 index on Thursday.
Real estate stocks became the second-best performing sector in the S&P 500 index on Thursday after the Fed's decision to keep interest rates unchanged triggered market optimism that the tightening cycle might be nearing an end.
Homebuilders and real estate investment trusts (REITs) outperformed the market as investors' interest turned to more defensive, cash-generating industries. These two types of stocks rose 4.1% and 3.4%, respectively, while$S&P 500 Index (.SPX.US)$It rose 1.9%.
In early trading, homebuilder stocks soared 5.2%, recording the biggest one-day gain since December 2022, and the gains have narrowed since then. REITs climbed for the fourth consecutive trading day after falling to their lowest level since March 2020 at the end of October.
Homebuilders have always benefited from tight inventories because decades-high mortgage interest rates have left existing homeowners with little incentive to sell second-hand homes, leading to a decline in the number of second-hand listings. The sector is up 37% year to date.
Seaport Research analyst Ken Zener will be on Thursday$KB Home (KBH.US)$with$Meritage Homes (MTH.US)$After a few house builders were upgraded from “neutral” to “buy,” the reason being “historically favorable environment.”
As for REITs, “Any sign that interest rates may stop rising or even fall, as shown by this week's 10-year Treasury yield trend, could be very helpful in determining real estate values, promoting refinancing, and possibly unlocking transactions,” Bloomberg Intelligence analyst Jeffrey Langbaum said.
Thursday's rise gave a glimmer of hope to many commercial real estate companies, which have been hit hard by excessive borrowing costs and high uncertainty about how long interest rates will last.
Among REITs, office buildings drove the sector higher, followed by hotels and resorts.
Langbaum added that this sector has also been reacting to the sharp decline in US Treasury yields. Thursday,$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$It fell for the second day in a row, falling below 4.7%.
However, not all real estate companies have risen,$Zillow-C (Z.US)$Shares fell 2.6% after the third quarter results were announced on Thursday. A day ago, digital real estate stocks rebounded after a jury determined that the National Association of Realtors had colluded to maintain high brokerage commissions.
Editor/jayden