NEW YORK, Jan 19 (Reuters) – Falling inflation and
expectations of an economic soft landing are buoying hopes for
U.S. real estate stocks in 2024, even as the sector continues to
lag the broader market.
Real estate investment trusts (REITs) were among the worst
performing sectors over the last year, with share prices weighed
down by factors ranging from high interest rates to tepid demand
for office space in an era of remote work. The Real Estate
sector of the S&P 500 fell 3.4% in 2023, while the
broad S&P 500 index soared more than 24% last year and hit a
record high on Friday.
Real estate’s pain has continued into 2024, pushing the
sector down 3.4% in January against a 1.4% gain for the S&P 500.
Yet some investors are growing more confident the trend will
reverse – especially if the Fed cuts rates as aggressively as
many investors expect. REITs benefit from lower rates which
reduce the cost of capital and fuel revenue growth.
“REITs were crushed by the fastest rate hiking cycle in
40 years, and are going to move in line with expectations of
rate cuts,” said Justin McAuliffe, a research analyst at Gabelli
Funds who remains bullish on REITs such as American Tower
.
Investors have been wading back into the sector. Global fund
managers increased their exposure to REITs by 15 percentage
points in December, pushing allocations to 12-month highs,
according to the latest survey from BofA Global Research.
At…
