Interest rates have stabilized from recent highs, such as yields on 10-year US Treasury bills (currently back below 4%) and 30-year fixed-rate national average mortgage rates (currently back below 7%). Because real estate investment trusts (REITs) may be booming.
Are we seeing the bottom, or are we just relieved again?
One simple way to measure the strengths or weaknesses of an entire REIT group is to Real Estate Select Sector SPDR Fund (New York Stock Exchange: XLRE). This exchange-traded fund (ETF) holds 34 real estate investment trusts and is commonly seen as a benchmark for sector performance.
Here is the weekly price chart:
Not only is it steadily rising from its mid-October lows, but it has also broken out of the 200-week moving average, which is trending slightly higher. Also, there seems to be a positive price divergence in the Relative Strength Indicator (RSI) below the price chart. The next step for the bulls is for the fund to rise above the 50-week moving average and stay there long enough to push the indicator up again.
Simon Property Group Co., Ltd. (New York Stock Exchange: SPGs) is one of the larger components of the Real Estate Select Sector SPDR Fund with a market cap of $38.6 billion. Here is the weekly price chart:
The price has broken out of both the 200 and 50 week moving averages. Both are trending downwards, but as long as it continues, this is progress. Note the positive divergence of the relative intensity chart. The September low was lower than his June and his July lows, but the RSI reading is higher.
Simon Properties pays a dividend of 6.22%.
Realty Income Co., Ltd. (New York Stock Exchange: 〇) has a market cap of $40.6 billion, making it one of the leading REITs to watch. The weekly price chart looks like this:
After a significant price drop from early August to mid-October, the REIT is showing renewed buying interest. Above the 50-week moving average, he recently reached the 200-week moving average. Realty pays him a 4.62% dividend at this price.
Extra Space Storage Co., Ltd. (New York Stock Exchange: EXR) is another major REIT with a market capitalization of $21.2 billion. Here is the weekly price chart:
This REIT hasn’t fallen as dramatically as others, but it hasn’t recovered as strongly. The price is steadily above the rising 200-week moving average, a bullish indicator. Investors would want to see it moving up and above the 50-week moving average so that a trend reversal becomes apparent.
Extra Space Storage pays a dividend of 3.86%.
REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has worked hard to identify the biggest opportunities in today’s market. Benzinga’s weekly REIT report.
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