Real estate stocks continue to dip as earnings season kicks off (NYSEARCA:PPTY)

Real estate stocks continued to dip as a hotter-than-expected inflation data marred sentiments, while the Q1 earnings season kicked off on a mixed note.

The Real Estate Select Sector SPDR Fund ETF (NYSEARCA:XLRE), which tracks the S&P 500 real estate stocks, closed 2.97% lower this week at 37.24 points. The fund posted losses in two out of the five sessions, particularly finishing 4.11% down on Wednesday on the back of the consumer inflation data.

“We now expect the FOMC won’t begin to ease policy until its Sept. 18 meeting,” Wells Fargo said.

Meanwhile, JPMorgan’s disappointing guidance and the results from major banks and asset managers contributed to the market averages ending lower on Friday.

The broader S&P 500 put in its worst weekly performance since late October last year. In addition to the inflation report, the stocks were also pressured by Treasury yields, which surged to their highest levels of 2024, and the geopolitical tensions in the Middle East.

On similar lines, Dow Jones Equity All REIT Total Return Index fell 2.38% during the course of the week and the FTSE Nareit All Equity REITs index was down 1.84%.

Seeking Alpha’s Quant Rating system changed its recommendation on XLRE to Strong Sell from Sell on Friday. The fund’s Momentum is rated D- and Risk D+. SA analysts continue to grade the fund as Buy.

XLRE is a large real estate ETF with diversified exposure to the sector, focusing on quality operators and excluding mortgage REITs. The ETF has outperformed broad-based real estate funds such as the Vanguard Real Estate ETF, which holds a more diverse portfolio, SA contributor REITer’s Digest said.

Fund Flows

The Real Estate Select Sector SPDR Fund ETF saw net outflows of $66.48M this week, compared to the outflows of $26.47M last week, according to the data solutions provider VettaFi.

Outflows of $11.76M were reported on Wednesday and $48.87M on Thursday, VettaFi said.

Fund flows into or out of an ETF are an indicator of investor sentiment related to the asset. With the inflation staying hot, bullish sentiment continues to decline.

Subsector Performance

Real Estate Management & Development emerged as the biggest laggard this week, losing 5.69% of value from last week. The sector has remained a gainer year-to-date. Industrial REITs and Specialized REITs were the other notable losers. Residential REITs stood out among subsectors, gaining by 0.21%. The subsector has benefitted from waning housing affordability and rising rents.

CBRE Group (CBRE), American Tower (AMT) and SBA Communications (SBAC) were the top S&P 500 real estate losers of the week. AvalonBay Communities (AVB), Camden Property Trust (CPT) and Mid-America Apartment Communities (MAA) were the major gainers. Altisource Portfolio Solutions (ASPS), Opendoor Technologies (OPEN) and Ohmyhome (OMH) were the other notable real estate losers.

Here is a look at the subsector performance: