With interest rates easing off of their recent highs, including the 10-year U.S. Treasury Note yield (now back under 4%) and the 30-year fixed-rate national average mortgage rate (now back below 7%), real estate investment trusts (REITs) may be perking up.
Is a bottom finally in store or is it just one more relief rally?
One quick way to measure strength or weakness in the entire REIT group is to take a look at the Real Estate Select Sector SPDR Fund (NYSE: XLRE). This exchange-traded fund (ETF) has 34 real estate investment trust holdings and is generally considered a benchmark for movements in the sector.
Here’s the weekly price chart:
Not only is it steadily upward off of the mid-October low price, it’s crossed back above a slightly uptrending 200-week moving average. Also, there seems to be a positive price divergence emerging on the relative strength indicator (RSI) below the price chart. The next step for bulls would be for the fund to make it above the 50-week moving average and stay there long enough to turn that indicator upward again.
Simon Property Group Inc. (NYSE: SPG) is one of the larger components of the Real Estate Select Sector SPDR Fund, with a market capitalization of $38.6 billion. The weekly price chart is here:
The price managed to cross back above both the 200- and the 50-week moving averages. Both continue to trend downward, but this is progress, as long as it continues. Note the positive divergence on the relative strength chart — a higher RSI reading even though the September low came in lower than the June and July lows.
Simon Property pays a dividend of 6.22%.
Realty Income Corp. (NYSE: O) has a market capitalization of $40.6 billion, making it another of the major REITs to watch. The weekly price chart looks like this:
After that massive slide in price from early August all the way into mid-October, buying interest is showing up again in this REIT. It’s back above the 50-week moving average and recently just touched the 200-week moving average. Realty is paying a 4.62% dividend at this price.
Extra Space Storage Inc. (NYSE: EXR) is another major REIT with a market capitalization of $21.2 billion. Here is the weekly price chart:
This REIT never fell as dramatically as the others, but it’s not rallying back as strongly either. The price remains steadily above a rising 200-week moving average, a bullish indicator. It would be better for investors to see it rise and stay above the 50-week moving average so that a trend reversal might be clear.
Extra Space Storage pays a 3.86% dividend.