Real Estate Stocks Tumble as Traders Reassess March Rate Cut Bets

Real estate stocks were the biggest drag on the S&P 500 Index Wednesday as traders moved back their bets on an interest-rate cut.

The sector, which was one of the biggest beneficiaries of easing rates in the fourth quarter, is highly sensitive to broader developments in the economy and markets. So with traders reducing wagers on a rate cut at the Federal Reserve’s March meeting and the yield on 10-year Treasuries rising to 4.11%, the highest since Dec. 12, real estate is primed to take a hit.

“We think that there will be payback from the strong Q4 rally as we approach the Fed meeting at the end of the month,” said Joe Gilbert, portfolio manager at Integrity Asset Management, LLC. “Generally, all real estate stocks will suffer but we are more cautious on the office REITs.”

Real Estate Stocks Slump as Traders Rethink Timeline of Cuts

Of course, in the broader picture, real estate stocks are just giving back some of their gains after a strong fourth-quarter rally sent a gauge of the sector soaring to its best quarter since 2009. The gauge sank 1.9% Wednesday and is down 3.7% since the start of the year, making it the third worst group in the S&P 500.

Real estate stocks struggled to regain stability for much of 2023 as the shift to remote work, panic around commercial real estate and the regional banking crisis weighed on the sector. Investors are now ditching shares, with an office REIT index heading for its worst week since November.