Real estate market takes a dip as inflation hits major indices Real estate market takes a dip as inflation hits major indices

Published On: February 17, 2024 12:05 pm

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As inflationary pressures make waves across the major indices, real estate stocks have encountered a slight setback this week.

The Producer Price Index saw a 0.3% rise in January, surpassing the anticipated 0.1% increase and accelerating from the 0.1% decrease in December. Simultaneously, the Consumer Price Index climbed by 0.3% in January, topping the expected 0.2% and slightly accelerating from the 0.2% pace in December.

With inflation stubbornly persistent, traders are backing away from expectations of a rate cut in May.

“There’s a meaningful chance—maybe it’s 15%—that the [Federal Reserve’s] next move is going to be upwards in rates, not downwards,” former Treasury Secretary Lawrence Summers stated in an interview on Friday, pointing to a number of “disturbing” inflation pressures.

The Dow Jones Industrial Average Index concluded at 38,627.99 on Friday, marking a 0.11% decrease from a week ago, while the NASDAQ Composite Index slid 1.34% to 15,775.65.

The S&P 500 experienced a 0.42% decline W/W to close at 5,005.57, after the index had gained approximately 5% from the commencement of 2024.

XLRE, which monitors S&P 500 real estate stocks, witnessed a 0.15% drop from last week to close at 38.35. The index is down 4.27% YTD.

The ETF observed net inflows of $147.22M this week, compared to outflows of $13.06M in the previous week, as indicated by data from the data solutions provider VettaFi.

Real estate services provider CBRE Group (CBRE) and health care REIT Welltower (WELL) experienced the most gains during the week, driven by solid Q4 results. On the other hand, data center REIT Digital Realty Trust (DLR) and telecom tower REIT SBA Communications (SBAC) emerged as the top losers of the week.

Brixmor Property Group (BRX), Safehold (SAFE), Zillow Group (Z)(ZG), STAG Industrial (STAG), Blackstone Mortgage Trust (BXMT), Chimera Investment (CIM), and Opendoor Technologies (OPEN) were the notable earnings winners of the week.

Among subsectors, Office and Health Care witnessed the most growth. Here is a breakdown of the subsector performance: