Achi news desk-
Real estate stocks slipped at the open on Wednesday, weighed down by the latest disappointing data on housing starts and rising mortgage rates, darkening the outlook for the sector.
By 9:00 am EST, the Dewis Real Estate Sector SPDR Fund XLRE decreased by 0.3%. This marked its fourth straight day of losses and set a course for its lowest close since late November 2023.
The fund has also slipped below its 200-day moving average, a crucial long-term benchmark, signaling that investor sentiment has turned negative.
The average interest rate for 30-year fixed-rate mortgages with loan balances up to $766,550 climbed 12 basis points to 7.13% for the week ending April 12, 2024, according to the latest figures from the Mortgage Bankers Association. This rate is the highest recorded since the beginning of December.
On Wednesday, the yield on the 30-year Treasury bond, a key benchmark for long-term mortgage rates, was trading at 4.75%, the highest since mid-November 2023, as Fed Chairman Powell admitted there had been a lack of progress. in the deflationary trend.
Also read: Powell Delays Fed Rate Cut, Says ‘We Need More Confidence In Inflation’: 2-year yields rise to 5%
Chart: Real Estate Stocks Fall Below Key Long-Term Moving Average As Inflation Bites Again
Weaknesses In A Continuing Multifamily Segment
Joel KahnMBA Vice President and Deputy Chief Economist, explained the increase in rates, noting, “Rates increased for the second week in a row, driven by incoming data indicating that the economy continues’ n strong and that inflation is proving more difficult to reduce.”
Despite the rise in mortgage rates, there was a 3.3% week-over-week increase in the Market Composite Index, which measures the volume of mortgage loan applications.
Kan further noted, “Application activity picked up, possibly as some lenders decide to act in case rates continue to rise. Purchase requests were the main driver of this increase, although they were still around 10% below last year’s levels. There was a slight increase in refinance applications, mainly due to a 3% increase in conventional applications.”
Chart: US 30 Year Mortgage Rates Rise to Highest Level Since Late November
The challenges of the real estate market are linked to shrinking affordability and availability as the supply of new homes falls.
Andrew Foraneconomist at Toronto Dominion Securities, commented on the trend in home construction, “Home construction activity moderated in March as weakness in the multi-family segment continued and the single-family segment contributed most of its gains significantly back from the previous month.”
Data revealed a month-on-month drop of 14.7% in the number of housing starts in March, with the figures falling to 1.32 million annual units, which is significantly lower than the 1.49 million predicted.
A decrease was seen in the single-family and multi-family sectors, with single-family starts down 12.4% (or 145,000 units) and multi-family starts plunging 21.7% (or 83,000 units). This retreat in multifamily starts marked the lowest level since April 2020.
In addition, residential permits fell more than expected in March, falling 4.3% month-on-month to 1.46 million annual units. This included a 5.7% drop in single-family permits – the first drop in fifteen months – and a 1.2% drop in multi-family permits.
Rise and Fall
The weakest performers among real estate stocks with a market cap of at least $1 billion on Wednesday were:
| Name | 1-day %chg |
|---|---|
| Prologis, Inc. PLD | -6.55% |
| First Industrial Realty Trust, Inc. FR | -3.33% |
| STAG Industrial, Inc. STAG | -2.89% |
| EastGroup Properties, Inc. EGP | -2.89% |
| Rexford Industrial Realty, Inc. REXR | -2.35% |
Those showing the highest returns were:
| Name | 1-day %chg |
|---|---|
| SL Green Realty Corp. SLG | 3.18% |
| Opendoor Technologies Inc. OPEN | 2.55% |
| Medical Property Trust, Inc. MPW | 2.49% |
| eXp World Holdings, Inc. EXPERIENCE | 2.32% |
| Vornado Realty Trust VNO | 2.25% |
Read now: Best REITs to Buy in April
Image: Midjourney
