Real estate stocks will grow 16%, analysts say

Analysts think real estate stocks have found their bottom, and are predicting double-digit growth in the coming months.

The key to that growth is reassurance that borrowing costs will hold steady, Bloomberg reported. In a Wednesday meeting, Federal Reserve Chair Jerome Powell indicated he would maintain interest rates, providing a stability that could prove to be an upside for real estate stocks. As a result, experts and investors are anticipating a 16 percent rally in real estate stocks in the next year, and a 15 percent boost specifically for real estate investment trusts (REITs). 

“It did seem like Powell took rate hikes off the table, which I think is a positive for REITs,” Janus Henderson Investors’ Gregory Kuhl told the outlet. “From where listed REITs are currently priced, I don’t believe the market needs to expect rate cuts for REITs to deliver solid performance.”

The Fed showed interest in keeping interest rates at their current elevated level for a longer period of time, rather than continuing rate hikes, while indicating that reduced borrowing costs won’t be realized in the near future. But that reduction is not necessary for real estate stocks to rebound.

“From where listed REITs are currently priced, I don’t believe the market needs to expect rate cuts for REITs to deliver solid performance,” Kuhl told the outlet. 

A sour outlook on inflation and interest rates has battered real estate stocks in recent months. But a softer than expected U.S. jobs report on Friday caused a drop in Treasury yields, typically a boon for real estate stocks.

“The jury’s still out on what happens in this type of environment,” RBC Capital Markets analyst Michael Carroll told the outlet. “But if rates stabilize, REITs could do well and you can start to value them on fundamentals again.” 

–– Kate Hinsche