Wall Street experts predict a big increase in the S&P 500’s real estate sector, expecting it to go up by 16% in the next year. They are particularly hopeful about real estate investment trusts (REITs), which they think could go up by 15%.
The real estate sector, which is sensitive to changes in interest rates, has had some tough times lately because Treasury yields have been going up. But things started to look better when recent job market news caused yields to drop.
This suggests that the cost of borrowing money for a long time might stay the same or even go down.
The Federal Reserve, led by Chair Jerome Powell, has said they won’t raise interest rates for now, keeping borrowing costs high instead of making them higher.
This decision, which means there won’t be more rate increases shortly, has made people feel good about the real estate market. Gregory Kuhl from Janus Henderson Investors thinks that just knowing there won’t be any rate hikes soon could be enough to make REITs do well.
Even though things are looking up, the real estate sector still has some problems, like not many companies buying or merging.
The current price of the S&P 500 Real Estate Index, which is 33 times what experts think it will earn in the next year, is a good deal for people who want to invest for a long time.
Experts like Michael Carroll from RBC Capital Markets think there are good opportunities in different parts of the REIT market, like industrial properties, places for older people to live, renting out single-family homes, and data centers, especially if Treasury yields stay steady.
