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The Fund employs an indexing investment approach designed to track the performance of the MSCI US Investable Market Real Estate 25/50 Index (the Index), an index that is made up of stocks of large, mid-size, and small U.S. companies within the real estate sector, as classified under the Global Industry Classification Standard (GICS).

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The Federal Reserve is cutting interest rates, and small-cap sectors like financials, real estate, consumer discretionary, and energy could benefit. ETFs like IWFN, VNQ, PSCD, and XOP offer exposure to these sectors.

Small-Cap Sectors Brace For Fed Rate Cut: Financials, Real Estate ETFs Offer Compelling Plays For Investors

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Investors are optimistic about real estate sector as Fed prepares for rate cuts. $2.2B inflow in August to REITs. IYR, VNQ, XLRE, RWR, REZ top performing ETFs.

Investors Funnel $2.2B Into These 5 Real Estate ETFs In Anticipation Of Fed Rate Cuts

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Fed Chair Jerome Powell&#39;s comments on rate cuts spark a market rally and drop in the dollar. Small caps outperformed, real estate and interest-rate sensitive industries saw gains.

Powell&#39;s Rate Cut Signal Triggers Small-Cap Rally, Gold Makes Record Highs, Dollar Tumbles: 7 ETFs On The Move

Vanguard Global ex-U.S. Real Estate ETF

The Federal Reserve is set to sprinkle some interest rate fairy dust, and small-cap sectors are lining up to see who'll soar or stumble. While the Russell 2000 is stealing the spotlight with its 5% surge ahead of the rate cut, not all small caps will feel the same love from <a href="https://www.benzinga.com/trading-ideas/small-cap-analysis">lower borrowing costs</a>. 
So, what sectors should investors be eyeing, and where do the best ETFs come into play?
<h2 class="wp-block-heading">Financials: Money Talks, But Who's Listening?</h2>
Small-cap financials, often living and breathing on rate-sensitive margins, are gearing up for a potential win. 
As borrowing costs fall, these lenders, insurers, and regional banks get a shot in the arm. For those looking to ride the wave, the iShares Russell 2000 Financials ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWFN#NYSE">IWFN</a>) offers concentrated exposure to this potentially booming sector.
<h2 class="wp-block-heading">Real Estate: Open House For Gains?</h2>
Real estate stocks also stand to benefit as mortgage rates and financing costs drop. With rate cuts loosening the borrowing purse strings, real estate could experience a boost in demand and valuation. 
Investors eyeing the space might find the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) or iShares U.S. Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYR#NYSE">IYR</a>) perfect for capturing the sector's expected rise.
Don&#8217;t miss out on this unparalleled opportunity:
<ul>
<li><a href="https://www.benzinga.com/events/small-cap/global-small-cap-conference-2024/" target="_blank" rel="noreferrer noopener">Register now to secure your spot at Benzinga&#8217;s Largest SmallCap Conference ever in Chicago!</a></li>
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<h2 class="wp-block-heading">Consumer Discretionary: Retail Therapy Ahead?</h2>
Lower interest rates also often mean more cash for consumers to splurge on non-essentials, giving a lift to small-cap retail, travel, and leisure names.
The SPDR S&amp;P 600 Small Cap Consumer Discretionary ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PSCD#NYSE">PSCD</a>) is one way to jump on this sector's shopping spree.
<h2 class="wp-block-heading">Energy: A Wildcard In The Small-Cap Mix</h2>
Energy stocks are notorious for being tied to oil prices, but lower rates can still offer some breathing room for these debt-heavy companies. 
For those ready to hedge their bets, the SPDR S&amp;P Oil &amp; Gas Exploration &amp; Production ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XOP#NYSE">XOP</a>) could be the small-cap energy ETF to watch.
Read Also: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/09/40749609/this-small-cap-top-pick-is-positioned-for-strong-gains-jpmorgan-sees-over-50-upside">This Small Cap &#8216;Top Pick&#8217; Is Positioned For Strong Gains, JPMorgan Sees Over 50% Upside</a>
<h2 class="wp-block-heading">Technology, Healthcare: Resilient But&#8230; Rate-Resistant?</h2>
While technology and healthcare sectors aren't as rate-sensitive as financials or real estate, they remain staples in small-cap ETFs like the iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) and Vanguard Small-Cap ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VB#NYSE">VB</a>). 
Both funds are solid all-around plays for investors who want diversified exposure to the small-cap space, especially as uncertainty lingers.
As the Fed moves its rate-cutting wand, small-cap sectors will each feel the ripples differently. 
Whether you're banking on financials, betting on real estate, or shopping for consumer discretionary, there's a sector—and ETF—for every investor's playbook.
Read Next: 
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<li><a href="https://www.benzinga.com/trading-ideas/long-ideas/24/09/40777734/exclusive-small-caps-at-most-attractive-relative-valuations-since-1990s-says-russell-inv" target="_blank" rel="noreferrer noopener">EXCLUSIVE: Small Caps At &#8216;Most Attractive Relative Valuations&#8217; Since 1990s, Says Russell Investments&#8217; Paul Eitelman</a></li>
</ul>
Don&#8217;t miss the opportunity to dominate in a volatile market at the&nbsp;<a href="https://www.benzinga.com/events/small-cap/global-small-cap-conference-2024/" target="_blank" rel="noreferrer noopener">Benzinga SmallCAP Conference on Oct. 9-10, 2024</a>,&nbsp;at the Chicago Marriott Downtown Magnificent Mile.
Get exclusive access to CEO presentations, 1:1 meetings with investors, and valuable insights from top financial experts. Whether you&#8217;re a trader, entrepreneur, or investor, this event offers unparalleled opportunities to grow your portfolio and network with industry leaders.
<a href="https://www.benzinga.com/events/small-cap/global-small-cap-conference-2024/" target="_blank" rel="noreferrer noopener">Secure your spot and get your tickets today!</a>
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Investors are increasingly eyeing the real estate sector with optimism as the Federal Reserve edges closer to initiating its <a href="https://www.benzinga.com/topic/interest-rates">much-anticipated rate-cut cycle.</a>
Real Estate Investment Trusts (REITs) have emerged as a standout performer in August, leading the market in gains while also becoming a magnet for investor inflows.
Five out of the 64 U.S.-listed real estate exchange-traded funds (ETFs) have collectively pulled in a robust $2.2 billion in net inflows over the past month. 
This influx of capital represents more than half of the total inflows that these ETFs have attracted over the entire past year, as market participants increasingly bet on the real estate sector to benefit from lower borrowing costs and more favorable financial conditions ahead of the potential Fed rate cut in September. 
Fed Chair Jerome Powell, in his remarks at the Jackson Hole Symposium, signaled that the Federal Reserve might consider lowering interest rates soon due to a noticeable cooling in the labor market. 
"The time has come for policy to adjust," he said, adding that &#8220;the cooling in labor market conditions is unmistakable.&#8221;
The Fed chair also expressed increased confidence that the economy is on a sustainable path toward the 2% inflation target. 
<h3 class="wp-block-heading">5 Real Estate ETFs Attract Inflows As Investors Jump On Rate-Cut Winners</h3>
The iShares U.S. Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYR#NYSE">IYR</a>) led the inflows, attracting $805.6 million in net investments over the past month—a sum that represents two-thirds of the fund's total inflows for the past year. 
The Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) –&nbsp;the largest real estate ETF with $37 billion in assets under management – saw a strong recovery in August, pulling in $613.6 million and nearly offsetting its earlier outflows, bringing its yearly inflows close to breakeven. 
The Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) also experienced robust activity, with $498.6 million in net inflows over the last month. 
Other notable performers included the SPDR DJ Wilshire REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/RWR#NYSE">RWR</a>) and the iShares Residential and Multisector Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/REZ#NYSE">REZ</a>), which attracted $146.7 million and $136.8 million, respectively, during August.
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>ETF</th>
<th>1-Month Fund Flows ($mln)</th>
<th>1-Year Fund Flows ($mln)</th>
</tr>
</thead>
<tbody>
<tr>
<td>iShares U.S. Real Estate ETF </td>
<td>805.6</td>
<td>1,193</td>
</tr>
<tr>
<td>Vanguard Real Estate ETF</td>
<td>613.6</td>
<td>-2.8</td>
</tr>
<tr>
<td>Real Estate Select Sector SPDR Fund </td>
<td>498.6</td>
<td>2,063</td>
</tr>
<tr>
<td>SPDR DJ Wilshire REIT ETF </td>
<td>146.7</td>
<td>132.8</td>
</tr>
<tr>
<td>iShares Residential and Multisector Real Estate ETF</td>
<td>136.8</td>
<td>95.9</td>
</tr>
<tr>
<td>Total</td>
<td>2,201.3</td>
<td>3,481.9</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: TradingView, as of Aug. 27, 2024</figcaption></figure>
<h3 class="wp-block-heading">Why Real Estate Sector Benefits From Interest Rate Cuts</h3>
Lower household borrowing costs and improved refinancing opportunities, fueled by expectations of declining interest rates, can significantly boost the profitability of real estate companies.
Real estate stocks, as represented by the VNQ ETF, have climbed 35% since their October 2023 lows, with a striking 14% gain in just the last two months, far outpacing the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>)&#8217;s modest 3% rise over the same period. 
This robust outperformance in real estate stocks aligns closely with growing market expectations for impending interest rate cuts.
As illustrated in the chart below, the largest real estate ETF has moved inversely to the 2-year Treasury yield, a crucial indicator of market expectations for short-term interest rates.
<h3 class="wp-block-heading">Chart: Declining 2-Year Yields Fuel Rally In Real Estate Stocks</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="508" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/27121530/image-270-1024x508.png" alt="" class="wp-image-516548" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/27121530/image-270-1024x508.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/27121530/image-270-300x149.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/27121530/image-270-768x381.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/27121530/image-270-1536x762.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/27121530/image-270.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
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Image created using artificial intelligence via Midjourney.

Jerome Powell's interest rate remarks Friday ignited a rally in stocks, bonds, and commodities, while the U.S. dollar plunged as traders solidified their bets on <a href="https://www.benzinga.com/topic/interest-rates">rate cuts</a>.
Financial markets responded positively to Fed chair Powell&#8217;s remarks at the Jackson Hole symposium, where he said the &#8216;&#8221;time has come <a href="https://www.benzinga.com/etfs/sector-etfs/24/08/40529209/jerome-powell-time-has-come-for-interest-rate-cuts-cooling-in-labor-market-unmistakable">for policy to adjust.&#8221;</a>
The Fed chair said he is more confident the economy is on a sustainable path back to the 2% inflation target, allowing the Fed to finally shift its focus to labor market conditions.
&#8220;We do not seek or welcome further cooling in labor market conditions,&#8221; he said, adding the Fed has &#8220;ample room to respond&#8221; by adjusting its policy should further weakening in labor market conditions occur.
<h3 class="wp-block-heading">7 Key ETFs React To Powell&#8217;s Jackson Hole Speech</h3>
A greenback gauge, as tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), tumbled by 0.7% at 11 a.m. ET., extending its weekly decline to 1.4% — the worst performance it has recorded this year.
Driven by expectations of lower interest rates and a weakening dollar, gold prices surged to a new all-time high of $2,530 per ounce following the speech, with the SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) climbing by 1.1%. 
Wall Street initially rallied before paring back some gains as traders assess the economic outlook.
Small caps, instead, substantially outperformed large-cap indices. The iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) soared 2.9%, on track for its strongest session since July 16. 
Within sectors, real estate stocks rallied, with the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) up 1.8%, hitting the highest levels since September 2022. 
Interest-rate sensitive industries saw significant gains following Powell&#8217;s remarks, with homebuilders, regional banks and miners leading the market.
The SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>) jumped 4.6%, while the iShares U.S. Home Construction ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ITB#NYSE">ITB</a>) climbed 3.2%, and the SPDR S&amp;P Metals &amp; Mining ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XME#NYSE">XME</a>) advanced 1.7%.
Don't miss the opportunity to dominate in a volatile market at the <a href="https://www.benzinga.com/events/small-cap/global-small-cap-conference-2024/">Benzinga SmallCAP Conference </a>Oct. 9-10 at the Chicago Marriott Downtown Magnificent Mile. 
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="440" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/23110937/image-232-1024x440.png" alt="" class="wp-image-511163" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/23110937/image-232-1024x440.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/23110937/image-232-300x129.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/23110937/image-232-768x330.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/23110937/image-232-1536x660.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/23110937/image-232.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
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Jerome Powell and Wall Street illustration. Photo: Federalreserve/Flickr Photo: Bylolo/Unsplash

Powell's Rate Cut Signal Triggers Small-Cap Rally, Gold Makes Record Highs, Dollar Tumbles: 7 ETFs On The Move

The Bank of Japan&#8217;s sudden U-turn on policy has ignited strong reactions on Wall Street this week, with investors now eyeing significant interest rate cuts <a href="https://www.benzinga.com/topic/interest-rates">from the Federal Reserve.</a>
Bank of America&#8217;s chief investment strategist, Michael Hartnett, believes that Wall Street has effectively forced the Bank of Japan into the decision to halt rate hikes during periods of market turmoil.
In his latest &#8220;Flow Show&#8221; report, Hartnett analyzed the implications of one of the most volatile weeks in global markets since the onset of the COVID-19 pandemic. 
&#8220;Wall Street has now (painfully) stopped BoJ hikes&#8230; its next goal appears to be bossing the Fed into big rate cuts,&#8221; Hartnett wrote.
<h3 class="wp-block-heading">Big Cuts Are Needed To Avoid Hard Landing</h3>
Hartnett indicated that the elevated interest rates are beginning to take a toll on small businesses. He suggested that significant rate cuts are necessary to avoid a hard landing for the economy. 
Currently, the U.S. prime rate – which is the lowest interest rates at which small businesses can borrow – stands at 6.5% in real terms, the highest level this century, making borrowing costs particularly burdensome for the real economy.
Higher-for-longer real rates are gradually and decisively hurting the U.S. consumer and labor market, according to Hartnett. 
He stressed that global rate cuts are no longer a question of &#8220;if&#8221; or &#8220;when,&#8221; but rather a matter of whether the cuts will be effective. 
&#8220;Big cuts are needed to work,&#8221; he said.
Also Read: <a href="https://www.benzinga.com/markets/equities/24/08/40278776/as-nvidia-leads-magnificent-7-volatility-analyst-says-these-mega-caps-are-poised-to-outperform-s">As Nvidia Leads Magnificent 7 Volatility, Analyst Says These Mega-Caps Are Poised To Outperform Small-Caps — But There&#8217;s A Catch</a>
<h3 class="wp-block-heading">Soft Landing Contingent On Reactions To Lower Interest Rates</h3>
A soft landing for the economy, Hartnett suggested, would depend on whether lower interest rates in the second half of the year can reinvigorate consumer spending and business activity. 
He pointed to key indicators to monitor, such as housing market data and small business sentiment.
According to the analyst, a recovery in mortgage purchases, refinancing activity, and small business sentiment driven by lower interest rates would be a positive indicator.
<h3 class="wp-block-heading">Sell AI Stocks, Buy Laggards After The First Cut</h3>
Hartnett maintained his stance of &#8220;sell the first cut,&#8221; anticipating that leadership in AI and AI-derivative plays may struggle in the second half until earnings-per-share gains become more visible. 
He recommended that investors &#8220;buy assets strangled by 5% yields&#8221; that could benefit from a decrease in yields to 3-4%.
These assets include government bonds, REITs, small-cap stocks, and distressed emerging markets like Brazil, which could benefit from a weaker dollar. 
Exchange traded funds investing in these assets include the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), the iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) and the iShares MSCI Brazil ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWZ#NYSE">EWZ</a>)
He also highlighted potential opportunities in housing markets in countries like the UK, Canada, Australia, New Zealand, and Sweden, where floating mortgage rates could lead to a quicker transmission of lower rates into increased consumer confidence. 
Finally, Hartnett suggested that global retail stocks could present the best buying opportunity in the event of a &#8220;hard landing&#8221; and a negative payroll print in the coming months, as these stocks, much like REITs, have already priced in a recession.
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Wall Street Shifts To 'Bossing The Fed Into Big Rate Cuts' After Bank Of Japan's Policy U-Turn, Analyst Says

Expectations that the Federal Reserve will soon begin cutting interest rates have driven mortgage rates to their lowest levels in over a year Wednesday, positively impacting both new mortgage applications and <a href="https://www.benzinga.com/money/mortgages">refinancing of existing loans.</a>
The average contract interest rate for 30-year fixed-rate mortgages — with conforming loan balances of $766,550 or less — fell significantly by 27 basis points to 6.55% for the week ending Aug. 2, marking the lowest rate since early May 2023
The decrease of 27 basis points from the rate of 6.82% on July 26 represents the largest weekly drop since July 2022 and reflects sizable reductions in Treasury yields.
The 30-year Treasury yield, a key benchmark for mortgage costs, dropped 34 basis points during the week ending Aug. 2, reaching approximately 4.2%. 
&#8220;Mortgage rates decreased across the board last week&#8230;following dovish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected,&#8221; said Joel Kan, the Mortgage Bankers Association&#8217;s vice president and deputy chief economist.
<h3 class="wp-block-heading">Chart: 30-Year Mortgage Rates Drop To Levels Last Seen In May 2023</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07085307/image-1-15-1024x576.png" alt="" class="wp-image-481621" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07085307/image-1-15-1024x576.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07085307/image-1-15-300x169.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07085307/image-1-15-768x432.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07085307/image-1-15-1536x864.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/08/07085307/image-1-15.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h3 class="wp-block-heading">Demand For Mortgages Jumps, Driven By Lower Interest Rates</h3>
Mortgage applications soared by 6.9% during the week ending Aug. 2, the sharpest increase in nearly two months and fully erasing the cumulative declines in applications from the two prior weeks. 
Applications for a loan to refinance a mortgage, which are more sensitive to weekly changes in interest rates, soared by nearly 16%.&nbsp;The MBA Mortgage Refinance index rose to the highest level in two years. 
Although the Federal Reserve kept the federal funds target unchanged at its July meeting, it hinted at a possible rate cut in September. Market speculation around a Fed rate cut sharply increased as a result of a weaker-than-expected July jobs report.
Commenting on the data, MBA chief economist Mike Fratantoni said: &#8220;The weakness in this report including the slower rate of wage growth and the higher unemployment rate certainly support such a cut, but the next inflation report needs to confirm that price growth is also slowing.
"The market is moving ahead of the Fed, bringing down longer-term rates including those for mortgages, which should lead to both more home purchases and a pickup in refinance activity," he said. 
<h3 class="wp-block-heading">Market Reactions</h3>
Shares of real estate companies surged in premarket trading on Wednesday, with the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) rising by 0.8%, following a 2% gain on Tuesday. The VNQ ETF is on course to reach levels not seen since January 2023.
Top premarket gainers were Howard Hughes Holding (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HHH#NYSE">HHH</a>), up 14.5%, Peakstone Realty Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PKST#NYSE">PKST</a>), up 5.4%, Opendoor Technologies Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/OPEN#NYSE">OPEN</a>), up 4.6% and Hudson Pacific Properties Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HPP#NYSE">HPP</a>), up 4.4%.
Mortgage-linked stocks as tracked by the iShares Residential and Multisector Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/REZ#NYSE">REZ</a>) are up over 2.5% in the premarket, after rallying 2.7% a day earlier. American Healthcare REIT, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AHR#NYSE">AHR</a>) and Community Healthcare Trust Incorporated (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CHCT#NYSE">CHCT</a>) led gains, up 9.4% and 2.9%, respectively. 
Read now: 
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<li><a href="https://www.benzinga.com/markets/equities/24/08/40172320/market-bets-on-feds-next-move-is-50-basis-point-cut-in-september-a-done-deal">Market Bets On Fed&#8217;s Next Move: Is 50-Basis-Point Cut In September A Done Deal?</a></li>
</ul>
Photo via Shutterstock.

Treasuries

CHCT

OPEN

PKST

Mortgage Rates Fall To 15-Month Lows, Boost Homebuyer Demand As Federal Reserve Hints At Rate Cuts

The <a href="https://www.benzinga.com/topic/covid-19">COVID-19 pandemic</a> accelerated a trend of workers preferring remote work to in-person office attendance. 
Meanwhile, <a href="https://www.benzinga.com/topic/commercial-real-estate">commercial real estate</a> across the U.S. has suffered as companies do not value expansive office spaces as they did before.
The Data: A <a href="https://x.com/KobeissiLetter/status/1817971321277763942">post</a> on X relayed data from Arbor Data Science.
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
<div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">The commercial real estate crisis is spreading: US office vacancy rates in San Francisco reached 25.4% in June, the most among major American metros. This is followed by Houston and Seattle where office vacancy rates are 23.8% and 23.2%. The lowest vacancy rates are still a… <a href="https://t.co/TzeveqJV0N">pic.twitter.com/TzeveqJV0N</a>
&mdash; The Kobeissi Letter (@KobeissiLetter) <a href="https://twitter.com/KobeissiLetter/status/1817971321277763942?ref_src=twsrc%5Etfw">July 29, 2024</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
<figcaption class="wp-element-caption">The following U.S. metropolitan areas have the highest office vacancy rates.</figcaption></figure>
<ul>
<li>San Francisco, California — 25.4% </li>
<li>Houston, Texas — 23.8% </li>
<li>Seattle, Washington — 23.2% </li>
<li>Austin, Texas — 22.9% </li>
<li>Denver, Colorado — 22.1% </li>
</ul>
San Francisco&#8217;s Bay Area, which includes Silicon Valley, is the heart of technology companies in the U.S. A 25.4% vacancy rate is much higher than its 9.3% median vacancy <a href="https://www.normmiller.net/wp-content/uploads/2015/04/Revisiting-the-Derivation-of-an-Equilibrium-Vacancy-Rate1.pdf">rate</a> from 1997 to 2013 (as found in a 2014 Journal of Real Estate Portfolio Management article).
Meanwhile, the bottom five cities have weathered the storm comparatively well.
<ul>
<li>Miami, Florida — 12% </li>
<li>Boston, Massachusetts — 12.8% </li>
<li>Tampa, Florida — 13.3% </li>
<li>Charlotte, North Carolina — 14.9%</li>
<li>Philadelphia, Pennsylvania — 15.3% </li>
</ul>
The U.S. overall office space vacancy rate crossed 20% for the first time in 2024&#8217;s second quarter, <a href="https://cre.moodysanalytics.com/insights/cre-trends/q2-2024-preliminary-trend-announcement/">according</a> to Moody&#8217;s.
Market Implications: REITs with commercial real estate holdings have by and large struggled since the onset of the pandemic:
<ul>
<li>Alexandria Real Estate Equities Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ARE#NYSE">ARE</a>) is the largest office REIT by market cap. It owns properties in San Francisco and Boston, among other locations. Its share price is down over 18% in the past five years.</li>
<li>BXP Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BXP#NYSE">BXP</a>), formerly Boston Properties, owns buildings in Boston, San Francisco and Seattle. Its share price is down 45% in the past five years.</li>
<li>Hudson Pacific Properties, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HPP#NYSE">HPP</a>) owns properties on the West Coast with exposure to San Francisco and Seattle. Its market capitalization is 83% less than it was five years ago.</li>
<li>Cousins Properties Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CUZ#NYSE">CUZ</a>) owns properties in Austin, Charlotte and Tampa, among other locations. Cousins shares are trading nearly 20% lower now than five years ago.</li>
<li>Kilroy Realty Corporation (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRC#NYSE">KRC</a>) owns office buildings in San Francisco and Austin. Its share are trading over 50% lower than five years ago.</li>
</ul>
Several exchange-traded funds (ETFs) track the real estate industry with some exposure to office REITs, including:
<ul>
<li>The Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>)</li>
<li>The Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>)</li>
<li>The Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>)</li>
</ul>
These funds have fared better than the individual office REITs due to their diversification.
Now Read:
<ul>
<li><a href="https://www.benzinga.com/real-estate/24/04/38111796/why-fitch-thinks-the-coming-commercial-real-estate-crash-could-be-worse-than-2008">Why Fitch Thinks The Coming Commercial Real Estate Crash Could Be Worse Than 2008</a></li>
</ul>

SCHH

Work From Home Has Hit Office Real Estate The Hardest In These 5 US Cities

The latest Fed&#8217;s favorite inflation report, unveiled Friday by the Bureau of Economic Analysis, showed mixed <a href="https://www.benzinga.com/topic/inflation">results for market participants</a>.
What Happened: The headline Personal Consumption Expenditure (PCE) price index fell to 2.5% year-on-year in June, as expected. 
The core component remained steady at 2.6%, countering expectations of <a href="https://www.benzinga.com/economics/macro-economic-events/24/07/39983210/feds-preferred-inflation-measure-shows-mixed-readings-personal-income-spending-fa">a drop to 2.5%.</a>
The headline index&#8217;s decline to 2.5% marks the lowest point since February 2021, a level also seen in January and February 2024.
This data kept market-based probabilities for a September rate cut largely unaffected, with fed futures continuing to indicate a 100% chance of rate reductions, according to CME Group&#8217;s FedWatch tool.
The Bureau of Economic Analysis also reported lower-than-expected monthly increases in both personal spending and personal income last month. 
<ul>
<li>Personal income rose 0.2% in June, down from 0.4% in May and below the expected 0.4%. </li>
<li>Personal spending increased 0.3%, also down from 0.4% in May and missing the forecasted 0.3%.</li>
</ul>
<h3 class="wp-block-heading">Market reactions and pre-market ETF performances</h3>
U.S. equity futures maintained strong gains during premarket trading, despite a slight dip in large-cap index futures following the PCE report.
The U.S. dollar index remained broadly unchanged, while Treasury yields inched slightly lower, boosting bond-related exchange-traded funds (ETFs) in pre-market trading.
Interest-rate sensitive sectors, such as real estate, miners, and small caps, rose. Technology stocks also sharply rallied following declines in the previous two sessions.
Investors and traders are closely monitoring these exchange-traded funds, which showed notable pre-market gains:
<ol>
<li>iShares Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SOXX#NYSE">SOXX</a>) up 2.3%</li>
<li>ARK Innovation ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ARKK#NYSE">ARKK</a>) up 1.8%</li>
<li>Technology Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) up 1.6%</li>
<li>Invesco Solar ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TAN#NYSE">TAN</a>) up 1.5%</li>
<li>iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) up 1.3%</li>
<li>Communication Services Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLC#NYSE">XLC</a>) up 1.2%</li>
<li>US Global JETS ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JETS#NYSE">JETS</a>) up 1.2%</li>
<li>VanEck Gold Miners ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GDX#NYSE">GDX</a>) up 1.1%</li>
<li>Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) up 0.9%</li>
<li>iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) up 0.5%</li>
</ol>
Now Read:
<ul>
<li><a href="https://www.benzinga.com/markets/equities/24/07/39970069/investors-go-all-in-on-small-caps-pour-over-6-billion-into-russell-2000-etf-this-month-they-will">Investors Go All In On Small Caps, Pour Over $6 Billion Into Russell 2000 ETF This Month: They &#8216;Will Return To Larger-Cap Alternatives,&#8217; Veteran Analyst Says</a></li>
</ul>
Image: Shutterstock

ARKK

Market Vectors ETF Trust Market Vectors Gold Miners

JETS

iShares PHLX SOX Semiconductor Sector Index Fund

SOXX

Fed's Favorite Inflation Gauge Falls To 2.5%, Lowest Since February 2021, But Core Remains Sticky: 10 ETFs To Monitor Thursday

This week marks the beginning of the real estate earnings season, featuring reports from 175 equity REITs, 40 mortgage REITs, and several housing industry firms, per Hoya Capital. After a challenging two-year period (including 50 percentage points of market underperformance), REITs are poised for potential gains following recent Federal Reserve rate cuts.
Since mid-April, the Equity REIT Index has jumped by 14.0%, topping the S&amp;P 500&#39;s 12.8% gain. Small caps and rate-sensitive REITs have led this revival. The recent retreat in interest rates has instilled optimism in the REIT sector, helping an apparent &quot;REIT revival.&quot;
Even before this changing sentiment about rate shift, there were signs of stabilization in private real estate valuations during late spring and early summer. The signs of recovery were in areas of office leasing activity and a continued firming in residential rents (especially in limited-supply markets and sub-sectors), according to Hoya Capital.
Inside Industry Ranks &amp; Valuation
REIT and Equity Trust - Residential industry falls in the top 18% segment of 250 Zacks industries.&nbsp;The industry is trading at a forward P/E of 16.85X versus 18.99X recorded by the S&amp;P 500.
Real Estate - Development industry&#39;s rank falls into the top 40%. The industry has a forward P/E of 11.78X, again indicating undervaluation compared with the S&amp;P 500.
REIT and Equity Trust - Retail falls in the top 12% section of 250 Zacks industries. The industry has a forward P/E of 13.76X, which is another area of undervaluation.
REIT and Equity Trust - Other also boasts a good industry rank (top 39%). The industry trades with a forward P/E of 12.88X.
<h3>ETFs in Focus</h3>
With the Fed likely to cut interest rates as soon as in September, REITs are likely to rebound as this a rate-sensitive investing area. The segment offers a sturdy yield, which is a plus for income-seeking investors if rates fall.
Hoya Capital High Dividend Yield ETF (ARCA:RIET) charges 50 bps in fees but yields as high as 9.54% annually. No stock accounts for more than 3.05% of the fund.
Vanguard Real Estate ETF (ARCA:VNQ) charges 13 bps in fees and yields 3.97% annually. The fund, however, has high company-specific concentration risks.
Real Estate Select Sector SPDR ETF (ARCA:XLRE) charges 9 bps in fees and yields 3.33% annually. The fund also has high company-specific concentration risks with Prologis making up more than 10% of the fund, followed by American Tower (9.20%), Equinix (7.43%) and Welltower (5.89%).
<a href="https://www.zacks.com/stock/news/2308198/what-lies-ahead-of-reit-etfs-this-earnings-season?cid=CS-BENZ-FT-etf_news_and_commentary-2308198">To read this article on Zacks.com click here.</a>

Earnings

RIET

What Lies Ahead of REIT ETFs This Earnings Season?

Mortgage rates are on a steady decline as investors have cemented expectations for upcoming reductions in the federal funds rate, yet mortgage demand continues to <a href="https://www.benzinga.com/topic/real-estate-investing">depict challenges among homebuyers. </a>
The Mortgage Bankers Association has reported Wednesday that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) dropped by 5 basis points to 6.62% for the week ending July 19, 2024. 
This marks the lowest borrowing cost for home purchases since early February 2024.
Despite the decline in mortgage rates, long-term Treasury yields remained stable last week. The 30-year Treasury yield has held steady between 4.20% and 4.25% over the past week.
Market expectations for a 25 basis point rate cut in September hover at 100%, remaining unchanged from the previous week, according to the CME FedWatch Tool. 
<h3 class="wp-block-heading">Bumpy demand for mortgages</h3>
Despite the decline in mortgage rates, mortgage demand has shown some setbacks. While the <a href="https://www.benzinga.com/real-estate/reit/24/07/39816656/fed-rate-cut-expectations-drop-mortgage-rates-to-4-month-lows-surge-in-new-applications-refinanc">previous week&#8217;s drop in mortgage rates </a>spurred a sharp rise in new mortgage and refinancing applications, these trends were more subdued last week.
Mortgage applications fell by 2.2% week-over-week, while the refinance index edged up by 0.3% to 614.9, hitting the highest level since mid-August 2022.
On Tuesday, the National Association of Realtors reported a significant 5.4% decline in existing home sales for June. This drop is likely due to rising buyer apprehensions as median home prices reach new all-time highs. 
Jeffrey Roach, chief economist for LPL Financial, commented on the situation, stating, &#8220;The low supply of homes and high interest rates have depressed affordability to near-term lows. Because of the tight supply of homes available for sale, median prices continue to rise. We should not expect this dynamic to improve until mortgage rates drop and supply increases.&#8221;
<h3 class="wp-block-heading">Market Reactions</h3>
The Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) was flat during the premarket trading session on Wednesday, following a 1% rise on Tuesday.
The SPDR Homebuilders ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XHB#NYSE">XHB</a>) fell 0.5% at the time of this writing, while the VanEck Mortgage REIT Income ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MORT#NYSE">MORT</a>) rose 0.5%. 
The worst performers in the premarket among real estate stocks were: 
<ul>
<li>Gladstone Land Corporation (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LAND#NASDAQ">LAND</a>) down 3.96%.</li>
<li>Compass, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/COMP#NYSE">COMP</a>) down 3.96%.</li>
<li>Service Properties Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SVC#NASDAQ">SVC</a>) down 3.47%.</li>
<li>Opendoor Technologies Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/OPEN#NASDAQ">OPEN</a>) down 2.71%.</li>
<li>Office Properties Income Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/OPI#NASDAQ">OPI</a>) down 1.48%. </li>
</ul>
Read Next:
<ul>
<li><a href="https://www.benzinga.com/markets/24/07/39920377/us-home-sales-see-sharpest-monthly-decline-in-1-5-years-as-record-high-prices-keep-buyers-on-the-sid">US Home Sales See Sharpest Monthly Decline In 1.5 Years As Record High Prices Keep Buyers On The Sideline</a></li>
</ul>
Image created using artificial intelligence via Midjourney.

COMP

LAND

MORT

Mortgage Rates Hit Lowest Point Since February As Investors Anticipate Fed Rate Cuts

Existing home sales in the United States plunged 5.4% in June 2024 from the previous month, marking the steepest monthly drop since November 2022. This decline is attributed to heightened buyer apprehension, as the median sales price reached a record high for <a href="https://www.benzinga.com/money/how-to-invest-in-real-estate">the second consecutive month.</a>
In June 2024, sales totaled 3.89 million units, a decrease from 4.11 million in May, according to data released Tuesday by the National Association of Realtors (NAR). Year-over-year, sales also fell by 5.4%.
The median existing-home price for all housing types in June was $426,900, an all-time high and an increase of 4.1% from $410,100 a year ago. 
Total housing inventory at the end of June was 1.32 million units, up 3.1% from May and 23.4% from a year ago (1.07 million). Unsold inventory stands at a 4.1-month supply at the current sales pace, up from 3.7 months in May and 3.1 months in June 2023.
NAR chief economist Lawrence Yun commented, "We&#8217;re seeing a slow shift from a seller&#8217;s market to a buyer&#8217;s market."
 "Homes are sitting on the market a bit longer, and sellers are receiving fewer offers.&nbsp;More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis," the economist added.
<h3 class="wp-block-heading">Chart: Home Sales Drop 5.4% In June</h3>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="501" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/23103342/image-37-1024x501.png" alt="" class="wp-image-451631" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/23103342/image-37-1024x501.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/23103342/image-37-300x147.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/23103342/image-37-768x376.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/23103342/image-37-1536x751.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/23103342/image-37.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h3 class="wp-block-heading">Regional Performance</h3>
All four U.S. regions saw both sales declines and price gains.
<ul>
<li>In the Midwest, existing-home sales dropped 8% from the previous month to an annual rate of 920,000 in June, a 6.1% decrease from the prior year. The median price in the Midwest was $327,100, up 5.5% from June 2023.</li>
<li>In the South, existing-home sales fell 5.9% from May to an annual rate of 1.76 million in June, down 6.9% from a year earlier. The median price in the South was $373,000, a 1.7% increase from last year.</li>
<li>Existing-home sales in the West declined 2.6% in June to an annual rate of 740,000, matching the figure from a year ago. The median price in the West was $629,800, up 3.5% from June 2023.</li>
<li>In the Northeast, existing-home sales decreased 2.1% from May to an annual rate of 470,000 in June, a 6% decline from June 2023. The median price in the Northeast was $521,500, a significant 9.7% increase from a year earlier.</li>
</ul>
<h3 class="wp-block-heading">Buyer Activity And Mortgage Rates</h3>
Properties typically remained on the market for 22 days in June, down from 24 days in May but up from 18 days in June 2023, the monthly Realtors Confidence Index showed.
First-time buyers accounted for 29% of sales in June, down from 31% in May but up from 27% in June 2023. NAR&#8217;s 2023 Profile of Home Buyers and Sellers – released in November 2023 – reported the annual share of first-time buyers was 32%.
Freddie Mac reported the 30-year fixed-rate mortgage averaged 6.77% as of July 18, down from 6.89% a week earlier and 6.78% a year ago.
All-cash sales made up 28% of transactions in June, unchanged from May and up from 26% a year ago. Individual investors or second home buyers, who constitute a significant portion of cash sales, purchased 16% of homes in June, the same as in May but down from 18% in June 2023.
Distressed sales – foreclosures and short sales – accounted for 2% of sales in June, unchanged from the previous month and the prior year.
<h3 class="wp-block-heading">Market Reactions</h3>
Real estate stocks, as tracked by the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), inched 0.4% higher Tuesday, on track to close the session at the highest level since February 2023.
Leading the sector were Opendoor Technologies Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/OPEN#NASDAQ">OPEN</a>), Compass, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/COMP#NYSE">COMP</a>) and eXp World Holdings, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/EXPI#NASDAQ">EXPI</a>), each recording gains between 3% and 3.5%.
NexPoint Diversified Real Estate Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NXDT#NYSE">NXDT</a>), Office Properties Income Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/OPI#NASDAQ">OPI</a>) and Alexandria Real Estate Equities, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ARE#NYSE">ARE</a>) were the laggards, down 3.5%, 2.9% and 2.6%, respectively. 
Read Now:
<ul>
<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/07/39905739/veteran-wall-street-investor-downplays-recession-odds-current-bull-market-has-more-">Veteran Wall Street Investor Downplays Recession Odds: &#8216;Current Bull Market Has More Support From Earnings&#8217;</a></li>
</ul>
Photo via Unsplash.

EXPI

NXDT

US Home Sales See Sharpest Monthly Decline In 1.5 Years As Record High Prices Keep Buyers On The Sideline

Foreign investment in U.S. homes has dropped to its lowest in 15 years, as per a fresh report by the National Association of Realtors.
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/06/39482229/home-prices-reach-new-record-highs-yet-signs-of-normalization-emerge">Low supply and high prices</a> have scared many foreign investors away from U.S. real estate, marking the seventh consecutive yearly drop in sales for this cohort.
The U.S. Home Market Slump: Unusually high inflation has pushed mortgage rates up, forcing many homeowners to stay in their current homes, bringing the supply of houses down significantly.
In this context, people who might have been looking for a new home are incentivized to stick to their low mortgage rates instead of selling their home in exchange for a more expensive mortgage.
The fall home sales hit its worst point in 28 years during 2023; and 2024 is lining up to be even worse. Looking at completed sales up to April, at this rate, 2024 would come with a drop of almost 2% since the previous year.
The panorama could change if the Fed decides to drop interest rates in an upcoming meeting. During a Wednesday call, a Bank of America economist <a href="https://www.benzinga.com//node/39819662">argued that the most likely rate cut will come in December</a>, against consensus from other colleagues who expect a drop by September.
Anticipation for an upcoming rate cut already caused a positive effect on the real estate market. On Wednesday, one report showed mortgages have come down to a four-month low last week, <a href="https://www.benzinga.com/real-estate/reit/24/07/39816656/fed-rate-cut-expectations-drop-mortgage-rates-to-4-month-lows-surge-in-new-applications-refinanc">with new applications up by almost 4%</a>.
<h1 class="wp-block-heading">Why Do Foreign Nationals Buy Houses In The U.S. And Why Are They Stopping?</h1>
The realtors report looked at two types of investor: foreign buyers who don't reside in the U.S. as well as visa holders who are not permanent immigrants, or new immigrants with less than two years in the country.
Foreign-born individuals with permanent U.S. residencies are not accounted for. For the groups examined, 45% of homes were purchased for use as a rental unit, vacation house, or both.
Yet the intended use of the homes varied greatly between the country of origin of the buyer. Forty-nine percent of Canadian buyers intend to use their homes for vacation, and only 16% as a permanent residency. For buyers from India, it was 6% for vacation and 66% for permanent residency.
Foreign investors might be lured by the U.S. real estate market as a way to diversify their foreign real estate investments in a market that has typically gone up with time.
Yet, the landscape for international buyers has been even worse than for U.S. buyers.&nbsp;
The U.S. dollar has strengthened against foreign currency in previous years, making it even more expensive for investors holding their capital in euros, Chinese yuan or Canadian dollars to purchase a U.S. home. 
Read Also: <a href="https://www.benzinga.com//node/39812270">Jerome Powell&#8217;s Top Advisor Hints At Fed&#8217;s Potential Rate Cut Plans: &#8216;All Moving In The Right Direction&#8217;</a>
While at a slower rate, foreign buyers continued to purchase homes in the U.S., with California, Florida, Texas and Arizona as main destinations. Against some prime locations around the world, the price per square meter for residential properties in the U.S. remains very competitive.
The price per square meter for a home in the San Jose-Sunnyvale-Santa Clara area in California is almost half that of Hong Kong. In Boulder, Colorado, a square meter costs half of that of Oslo, Norway, and a third of the average Canadian price.
In the period running from April 2023 to March 2024, there were only 54,300 U.S. homes sold to international buyers, the lowest it's been since the association began measuring the data point in 2009. This marks a whopping 36% decline since the previous year.
In dollars, this meant a 21% decrease, with purchases worth only $42 billion against $153 billion in 2017
But this year's drop is no exception. There have been year-over-year drops for the last seven periods, from a recent peak of 284,500 U.S. homes bought by foreigners in 2017.
Those who did buy a house in America did it for a higher price. The average sale reached $780,300, a 22% spike from the previous year.
<h1 class="wp-block-heading">Impact On The Market</h1>
Foreign buyers accounted for only 1.3% of all U.S. home sales during the April 2023-March 2024 period, yet they represent a much more significant portion of the market in specific locations like Florida, Texas and California.
While the report analyzed a drop in foreign sales, most of its reasons are domestic, serving to better understand the state of the real estate market for homes in the U.S.
The drop in supply stemming from the rise in interest rates has affected U.S. buyers as much as foreigners.
<a href="https://www.benzinga.com/markets/equities/24/06/39204534/european-central-bank-cuts-interest-rates-by-0-25-but-projects-inflation-above-target-well-into-">Upcoming cuts in interest rates across the globe, and specially in Europe</a> could soon reignite foreign interest in the U.S. market. This might be even more true if it falls in line with an increased supply of homes that could come if mortgage rates continue to drop.
There are several real estate companies focused on the residential sector that are part of the S&amp;P 500 index. These include Equity Residential (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EQR#NYSE">EQR</a>), Essex Property Trust Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ESS#NYSE">ESS</a>), Mid-America Apartment Communities Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MAA#NYSE">MAA</a>), AvalonBay Communities Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AVB#NYSE">AVB</a>) and Invitation Homes Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/INVH#NYSE">INVH</a>).
Most real estate ETFs are not pure-play residential, with the exception of iShares Residential and Multisector Real Estate (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/REZ#NYSE">REZ</a>). Others follow the U.S. real estate market more broadly but are still liable to be affected by swings in the residential home market. These include Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) and Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) among the largest.
Now Read: 
<ul>
<li><a href="https://www.benzinga.com//node/39718690">&#8216;Apocalyptic&#8217; Manhattan Real Estate Deals Keep Coming — Sector Mayhem Or Investment Opportunity?</a></li>
</ul>

Politics

INVH

Foreigners Don't Want Your US Home: Sales Drop To 15-Year Lows For International Buyers

The anticipation of Federal Reserve rate cuts is starting to have a favorable impact on the <a href="https://www.benzinga.com/money/mortgages">real estate mortgage market. </a>
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased by 13 basis points to 6.87% for the week ending July 12, 2024, down from 7% the prior week, as reported by the Mortgage Bankers Association Wednesday. 
This decline represents the most significant drop in borrowing costs in around four months and the lowest rate since early March. 
Fed Rate Cut Bets, Lower Treasury Yields Push Mortgage Rates Down
The reduction was largely propelled by rising expectations on Fed rate cuts and the fall in 30-year Treasury yields, a key indicator for long-term mortgage rates, which decreased by approximately 30 basis points month-to-date to 4.37%.
Market expectations for a 25 basis point rate cut in September have surged to nearly 100%, up from a 60% likelihood a month ago, according to the CME FedWatch Tool.
Joel Kan, the MBA's vice president, said, &#8220;Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower.&#8221;
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="500" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082633/image-26-1024x500.png" alt="" class="wp-image-440604" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082633/image-26-1024x500.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082633/image-26-300x147.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082633/image-26-768x375.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082633/image-26-1536x750.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082633/image-26.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Rising Mortgage Demand
The 13 basis point reduction in mortgage rates has positively influenced demand, with applications for new mortgages and refinancing existing mortgages rising significantly last week. 
According to MBA data, mortgage applications in the U.S. jumped by 3.9% in the third week of July, recovering from declines in the previous two weeks to achieve the sharpest increase in a month.
Refinancing applications, which are particularly sensitive to weekly rate changes, increased by 15% from the previous week, reaching their highest level in two years.
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="500" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082958/image-27-1024x500.png" alt="" class="wp-image-440610" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082958/image-27-1024x500.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082958/image-27-300x147.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082958/image-27-768x375.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082958/image-27-1536x750.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/07/17082958/image-27.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Market Reactions
The Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) traded 1.33% higher at the time of publication Wednesday, after closing 1% higher Tuesday. The Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) was up 1.27%.
Top performers in the premarket were:
<ul>
<li>SL Green Realty Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLG#NYSE">SLG</a>) up 2.30%. </li>
<li>CubeSmart (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CUBE#NYSE">CUBE</a>) up 1.90%.</li>
<li>National Storage Affiliates Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NSA#NYSE">NSA</a>) up 0.90%.</li>
<li>Kennedy-Wilson Holdings, Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KW#NYSE">KW</a>) up 0.56%.</li>
<li>Alexandria Real Estate Equities (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ARE#NYSE">ARE</a>) up 0.54%.</li>
<li>Vornado Realty Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNO#NYSE">VNO</a>) up 0.47%. </li>
</ul>
Read Next:
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<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/07/39805707/regional-bank-gains-hit-levels-unseen-since-silicon-valley-banks-failure-as-investo">Regional Bank Gains Hit Levels Unseen Since Silicon Valley Bank&#8217;s Failure As Investor Sentiment Shifts To Small-Cap Names</a></li>
</ul>
Photo: Shutterstock

CUBE

Fed Rate Cut Expectations Drop Mortgage Rates To 4-Month Lows: Surge In New Applications, Refinance Demand

Fed Chair <a href="https://www.benzinga.com/topic/jerome-powell">Jerome Powell</a> said Tuesday the commercial real estate sector will remain <a href="https://www.benzinga.com/topic/commercial-real-estate">under stress for some time</a>.
"It is a risk that has been with us and will be with us for some time, probably for years," Powell told the Senate Banking Committee. "And banks need to be honestly assessing what their risk is."
Many real estate assets purchased before the Covid-19 pandemic with loans from banks and other financial institutions are now worth less than the loans.
See Also: <a href="https://www.benzinga.com/federal-reserve/24/06/39169354/doom-and-gloom-in-office-space-real-estate-delinquency-data-tells-another-story">Doom And Gloom In Office Space Real Estate? Delinquency Data Tells Another Story</a>
As a result, many commercial real estate owners are selling their properties in distress, bringing about a new era of opportunity for real estate investors.
Take the Continental Center in New York City, for example. The 41-story skyscraper, located at 180 Maiden Lane in Manhattan's Financial District, sold <a href="https://commercialobserver.com/2024/07/clarion-mhp-sale-carlo-bellini-180-maiden-lane/">to</a> 99c, a real estate firm owned by Canadian biotech investor Carlo Bellini, for just $297 million.
The same building was purchased in 2015 for $470 million. Clarion Partners and MHP took out a $248 million loan from BlackRock Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BLK#NYSE">BLK</a>) and <a href="https://therealdeal.com/new-york/2024/01/09/financial-district-office-heads-to-distress-sale/">refinanced</a> the debt in 2020 with a $372 million loan led by ING Groep NV (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ING#NYSE">ING</a>).
Clarion and MHP reportedly invested $175 million in renovations, putting their entire investment north of $645 million. They reportedly sold the property quickly to avoid foreclosure.
Clarion didn't reply to a request for comments.
"Manhattan&#8217;s office meltdown has gone from concerning to apocalyptic with little end in sight…" Triple Net Investor, an influencer, <a href="https://x.com/TripleNetInvest/status/1810840957333688701">wrote</a> on X.
For office buildings, the average sale prices per square foot dropped 66% between June 2023 and late May.
The Continental Center, built in 1983, is currently only occupied at 68%, dropping from 71% in January. This is almost three times the average vacancy rate for commercial real estate in New York City, which in March was 12.8% according to the comptroller's office.
Read Also: <a href="https://www.benzinga.com//node/39621351">Mortgage Applications Fall As Rates Climb Back Above 7%</a>
<h3 class="wp-block-heading">Why Is Commercial Real Estate Such A Mess?</h3>
"The seismic, pandemic-driven shift toward remote work has substantially pushed down demand for office space, approximately doubling the vacancy rate," writes a comptroller <a href="https://comptroller.nyc.gov/reports/spotlight-new-york-citys-office-market/#:~:text=Vacancy%20rates%20have%20roughly%20doubled,46%25%20of%20office%20space%20citywide.">report</a>.
New York's commercial real estate vacancy rate was a mere 6.4% in early 2020 &#8212; before the pandemic unfolded.
Pandemic disruptions were followed by decades-high interest rates which had a slashing effect on <a href="https://www.benzinga.com/money/best-reits">REITs</a>.
The trend isn&#8217;t exclusive to New York. 
Earlier this year, the U.S. vacancy rate for commercial real estate <a href="https://www.benzinga.com/real-estate/24/01/36707378/office-space-hits-highest-vacancy-rate-since-1979-heres-why-converting-it-to-residential-space-isnt">reached its highest levels since 1979</a>, at about 20%. By May, the rate had dropped to 17.8% as per a CommercialEdge <a href="https://www.commercialedge.com/blog/national-office-report/">report</a>.
A recent report by real estate firm Colliers found last month that there was <a href="https://www.benzinga.com/real-estate/24/06/39461452/manhattan-office-market-has-a-breakout-month-with-a-70-surge-in-leasing-activity">a 70% pick-up in leasing activity in New York City</a> as compared to last year. While this metric brings optimism for real estate investors, CommercialEdge argues that the remote and hybrid work trends are here to stay, and vacancies will likely remain flat across the country.
ETFs following the real estate sector haven&#8217;t performed well as of late. Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), the biggest one by assets under management, was up 0.2% on Wednesday, having lost 3.8% in the past six months.
Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) shows a similar trajectory, up 0.3% on Wednesday at the time of this writing and down 2.7% since in the past six months.
Residential real estate continues to struggle from high interest rates, with the affordability of buying a home <a href="https://www.benzinga.com/economics/macro-economic-events/24/07/39614880/now-owning-a-house-in-us-is-more-challenging-than-ever-as-affordability-drops-to-">reaching its lowest level in 17 years last week</a>.
Now Read:&nbsp;
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<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/06/39482229/home-prices-reach-new-record-highs-yet-signs-of-normalization-emerge">Home Prices Reach New Record Highs, Yet &#8216;Signs Of Normalization&#8217; Emerge</a></li>
</ul>
Manhattan Skyline, including the Continental Center on the left, by Szilas on Wikimedia Commons.

Asset Sales

General

'Apocalyptic' Manhattan Real Estate Deals Keep Coming — Sector Mayhem Or Investment Opportunity?

A 2024 election victory for ex-President Donald Trump could unleash a new wave of deregulation, <a href="https://www.benzinga.com/real-estate/reit/24/02/36933312/the-2024-showdown-trumps-deregulation-vs-bidens-healthcare-expansion-what-it-means-for-investors">according to Goldman Sachs</a>.
This would help companies in industries subject to strict rules and regulatory oversight, the firm&#8217;s analysts, Ronnie Walker and Alec Phillips, explained in a research note. Those sectors include energy (oil and gas), utilities, financials, healthcare, industrials, materials, and telecom. Conversely, consumer discretionary, consumer staples, technology, and real estate have less exposure.
Recall Trump&#8217;s recently proposed deal with leading oil and gas companies, where he offered to roll back environmental regulations in return for <a href="https://www.benzinga.com/news/24/05/38997165/trumps-policies-for-money-transaction-with-big-oil-under-investigation-by-senate-democrats-cronyism">$1 billion in campaign contributions</a>.
It&#8217;s worth noting, however, that the Biden administration presided over a record boom in oil and gas. Politico <a href="https://www.eenews.net/articles/what-bidens-oil-record-means-for-the-industrys-future/">reports</a> that Biden&#8217;s Interior Department, which oversees the federal oil program, outpaced Trump in approving new drilling permits.
But according to the Wall Street investment bank, &#8220;equity market sectors that might benefit from an easier regulatory environment generally saw relative strength alongside the changing presidential probabilities.&#8221;
<h3 class="wp-block-heading">ETFs To Watch </h3>
<ul>
<li>SPDR Oil &amp; Gas Exploration And Production (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XOP#NYSE">XOP</a>)</li>
<li>iShares U.S. Aerospace And Defense ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ITA#NYSE">ITA</a>)</li>
<li>SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>)</li>
<li>Invesco S&amp;P Smallcap Industrials ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PSCI#NYSE">PSCI</a>)</li>
<li>SPDR S&amp;P Telecom ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XTL#NYSE">XTL</a>)</li>
<li>Utilities Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLU#NYSE">XLU</a>)</li>
<li>Health Care Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLV#NYSE">XLV</a>) </li>
</ul>
<h3 class="wp-block-heading">Focus Areas For Deregulation</h3>
During Trump&#8217;s previous administration, significant deregulatory actions targeted environmental and energy regulations, including lowering fuel efficiency standards and reducing environmental permitting requirements.
Energy companies even <a href="https://www.npr.org/2020/08/13/901863874/trumps-methane-rollback-that-big-oil-doesn-t-want">criticized</a> Trump who, in 2020, rolled back rules meant to reduce climate-warming methane emissions — far more potent than carbon dioxide. Shell, BP and the Exxon Mobil Corp disapproved of his decision.
Biden <a href="https://degette.house.gov/media-center/press-releases/biden-signs-legislation-invalidate-trump-administrations-methane-rule">reinstated</a> the methane emissions standards the following year. 
Should Trump win in November, he will likely roll back the Biden-era methane emission rules, Goldman&#8217;s analysts said.
Another apparent change, the firm notes, would likely be the resumption of LNG export permit approvals, which were paused under Biden.
Goldman Sachs expects a Trump administration to expand LNG exports, and reverse restrictions on greenhouse gas emissions. Additionally, there would likely be an expansion of oil leases on federal land and offshore energy development, and eased regulations on refineries.
In the utilities sector, a Trump administration would likely seek to modify recently finalized rules restricting CO2, mercury, and other pollutants from fossil-fuel-fired power generation. 
Regarding auto emissions, the administration would probably aim to relax limits set by the Biden administration, which automakers might meet by increasing the proportion of electric vehicles sold. Goldman Sachs also anticipates a tightening of domestic content requirements for electric vehicle subsidies and loosened criteria for energy credits to make it easier for less climate-friendly energy sources to qualify.
While antitrust enforcement officials in a potential Trump administration might continue pursuing some cases in the internet/tech sector, merger enforcement could ease compared to the current regime.
<h3 class="wp-block-heading">Financial Regulations</h3>
Financial regulation might also shift, with more rapid changes in consumer finance and more gradual adjustments in capital and liquidity requirements. 
A key area for potential changes is the "Basel III Endgame," which would raise capital requirements for large banks. However, the Federal Reserve and the Federal Deposit Insurance Corporation are independent of the White House, and their leadership terms do not automatically turn over with a new administration. 
For instance, Fed Vice Chair for Supervision Michael Barr's term runs through July 2026, and Chair Powell's term runs through May 2026, complicating the outlook and timing.
In contrast, leadership of the Consumer Financial Protection Bureau (CFPB) would likely change quickly under a Trump administration, benefiting consumer finance stocks.
Now Read:
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<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/07/39677621/ed-yardeni-downplays-recession-fears-but-warns-we-need-more-bears-to-keep-the-bull-">Ed Yardeni Downplays Recession Fears But Warns, &#8216;We Need More Bears To Keep The Bull Market Going&#8217;</a></li>
</ul>

Government

Regulations

New ETFs

Topics

iShares Dow Jones US Aerospace & Defense Index Fund

PSCI

Trump's Deregulation Agenda: Oil & Gas, Defense, And Finance Stocks May Benefit From Loose Rules, Goldman Sachs Says

Residential house prices continued their upward trend, reaching new all-time highs in April 2024, yet the pace of growth has slowed, potentially suggesting<a href="https://www.benzinga.com/topic/housing-market"> early signs of normalization.</a>
The resilience of house prices was broad-based across the country, with all 20 of the largest U.S. metropolitan areas showing positive monthly increases. San Diego led the annual gains with double-digit growth.
<h3 class="wp-block-heading">April&#8217;s House Price Index: Key Highlights</h3>
<ul>
<li>U.S. house prices rose 0.2% month-over-month in April, up from a revised flat reading in March, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index. This increase fell short of economist expectations of a 0.3% growth, as reported by Econoday.</li>
<li>House prices rose 6.3% from April 2023 to April 2024, slowing from the 6.7% year-over-year growth recorded in March 2024.</li>
<li>For the nine census divisions, seasonally adjusted monthly price changes from March 2024 to April 2024 ranged from -0.2% in the West South Central and Middle Atlantic divisions to +1.4% in the East South Central division. The 12-month changes were all positive, ranging from +3.0% in the West South Central division to +8.5% in the New England and Middle Atlantic divisions.</li>
</ul>
<h3 class="wp-block-heading">April&#8217;s S&amp;P CoreLogic Case-Shiller Index: Key Highlights</h3>
<ul>
<li>The 20-city S&amp;P CoreLogic Case-Shiller U.S. National Home Price Index reported a 7.2% seasonally unadjusted annual gain for April, down from a 7.4% annual gain in the previous month. This marks the first year-over-year deceleration in U.S. residential real estate prices, though it exceeded forecasts of 7% growth.</li>
<li>On a month-over-month basis, the 20-city index rose by 1.4%, slightly decelerating from March&#8217;s 1.6% increase.</li>
<li>San Diego continued to report the highest annual gain among the 20 cities in April, with a 10.3% increase, followed by New York and Chicago, with increases of 9.4% and 8.7%, respectively. Portland recorded the smallest year-over-year growth, with a 1.7% annual increase in April.</li>
</ul>
<h3 class="wp-block-heading">Economist Takes</h3>
"For the second consecutive month, we've seen our National Index jump at least 1% over its previous all-time high," Brian D. Luke, head of commodities, real &amp; digital assets at S&amp;P Dow Jones indices, said. 
Luke stated that 2024 was closely mirroring the strong start observed in the previous year. He mentioned that March and April had posted the largest rise, before a slowdown occurred in the summer and fall.
&#8220;Heading into summer, the market is at an all-time high, once again testing its resilience against the historically more active time of the year,&#8221; he added.
Luke also highlighted that 13 markets were currently at all-time highs, with San Diego leading once again, topping annual returns for the last six months.
A more cautious outlook came from Dr. Anju Vajja, deputy director for FHFA's Division of Research and Statistics, who noted that despite the rise in April, the appreciation rate slowed amid a slight rise in both mortgage rates and housing inventory. 
&#8220;The housing market in general began to show some signs of normalization,&#8221; she added.
<h3 class="wp-block-heading">Market Reactions</h3>
The housing data released Tuesday failed to trigger a positive reaction on real estate stocks, as hawkish Fed remarks pushed Treasury yields slightly higher. 
The&nbsp;Real Estate&nbsp;Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) was 0.9% lower at 09:05 a.m. in New York, eyeing its worst session in nearly a month. 
Both the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) and the iShares Residential and Multisector Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/REZ#NYSE">REZ</a>) similarly fell 0.8%. 
The VanEck Mortgage REIT Income ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MORT#NYSE">MORT</a>) showed more contained losses, down 0.3%. 
SBA Communications Corporation (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SBAC#NASDAQ">SBAC</a>) and Weyerhaeuser Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/WY#NYSE">WY</a>) were the laggards within the XLRE ETF, both down 1.7%. 
The 30-year Treasury yield, a key benchmark for mortgage rates, rose by 2 basis points to 4.38%, sending the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) down by 0.2%. 
Read now:<a href="https://www.benzinga.com/topic/real-estate-investing"> Popular Real Estate Investment Offerings – Start Generating Passive Income Through Real Estate</a>
Image generated using artificial intelligence via Midjourney.

Macro Notification

Specialty ETFs

SBAC

Home Prices Reach New Record Highs, Yet 'Signs Of Normalization' Emerge

A cooler-than-expected U.S. inflation report fueled a rally on Wall Street, ahead of the highly anticipated Federal Open Market Committee (FOMC) <a href="https://www.benzinga.com/markets/equities/24/06/39289912/us-inflation-eases-more-than-expected-in-may-boosts-2024-rate-cut-prospects-ahead-of-wednesdays-">meeting at 2:00 p.m. Wednesday.</a>
What happened: Inflation slowed to 3.3% annually in May, below both the expected and previous rate of 3.4%. On a monthly basis, the Consumer Price Index (CPI) remained flat, below the anticipated 0.1% increase and a significant drop from April&#8217;s 0.3% rise.
Additionally, the core measure of inflation, which excludes energy and food, weakened more than predicted. Annually, core inflation slowed from 3.6% to 3.4%, falling short of the 3.5% expectation.
Why it matters: Lower-than-expected inflation data is bolstering hopes for a steady return to the Federal Reserve&#8217;s 2% target and raising expectations for interest rate cuts later this year.
Markets are now assigning a probability of over 70% for a September rate cut, up from 54% before the inflation report. Notably, Fed futures now indicate 55 basis points of rate cuts priced in by the end of the year, implying two rate cuts.
Prospects of a declining cost of borrowing are aiding interest-rate sensitive sectors and stocks, which had lagged in recent weeks due to fears of prolonged higher rates.
Market reactions: Small caps, as tracked by the iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>), were the brightest spot in the market, opening 2.9% higher and on track for the best-performing day year to date.
Chart: Small Caps Eye Best Day Since Mid-December 2023
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="500" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/12094652/image-30-1024x500.png" alt="" class="wp-image-384572" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/12094652/image-30-1024x500.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/12094652/image-30-300x147.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/12094652/image-30-768x375.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/12094652/image-30-1536x750.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/06/12094652/image-30.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
In comparison, large-cap indices such as the S&amp;P 500, the Nasdaq 100, and the Dow Jones Industrial Average were all about 0.9% higher.
Sector-wise, real estate and materials were the best performers, with the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) and the Materials Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLB#NYSE">XLB</a>) up 2.2% and 1.6%, respectively.
Industry-wise, homebuilders, regional banks, solar, and biotech stocks were the top performers, showing notable increases.
<ul>
<li>SPDR S&amp;P Homebuilders ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XHB#NYSE">XHB</a>) up 4%</li>
<li>Invesco Solar ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TAN#NYSE">TAN</a>) 3.9%</li>
<li>SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>) up 3.3%</li>
<li>SPDR S&amp;P Biotech ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XBI#NYSE">XBI</a>) up 2.3%</li>
</ul>
According to <a href="https://pro.benzinga.com/dashboard">Benzinga pro</a> data the top-performing stocks (with at least $1 billion of market cap) in the hour following the U.S. inflation report were: 
<ol>
<li>Sunrun Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/RUN#NASDAQ">RUN</a>): 7.87%</li>
<li>Array Technologies Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ARRY#NASDAQ">ARRY</a>): 7.65%</li>
<li>Opendoor Technologies Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/OPEN#NASDAQ">OPEN</a>): 7.44%</li>
<li>Element Solutions Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ESI#NYSE">ESI</a>): 6.78%</li>
<li>TeraWulf Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/WULF#NASDAQ">WULF</a>): 6.68%</li>
<li>Iamgold Corporation (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IAG#NYSE">IAG</a>): 6.55%</li>
<li>Globus Medical Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GMED#NYSE">GMED</a>): 6.04%</li>
<li>Dyne Therapeutics Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/DYN#NASDAQ">DYN</a>): 5.99%</li>
<li>Enphase Energy Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ENPH#NASDAQ">ENPH</a>): 5.93%</li>
<li>Upstart Holdings Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/UPST#NASDAQ">UPST</a>): 5.75%</li>
</ol>
Looking ahead, traders are now eagerly anticipating the Federal Open Market Committee (FOMC) meeting. The statement and new macroeconomic projections will be released at 2:00 p.m. ET, followed by Fed Chair Powell's press conference at 2:30 p.m. ET.
<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"> 
<div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="&#x1f534;WATCH LIVE: Jerome Powell Speaks, FOMC Press Conference &#x7C; June 12th, 2024" width="500" height="281" src="https://www.youtube.com/embed/dt2EqXr84ks?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>
</div>
</figure>
Read now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/06/39252500/fed-meeting-preview-economists-predict-steady-rates-in-june-fewer-cuts-ahead">Fed Meeting Preview: Economists Predict Steady Rates In June, Fewer Cuts Ahead</a>
Photo: Shutterstock

ARRY

ENPH

GMED

UPST

WULF

Soft Inflation Data Boosts Small Caps, Real Estate, Regional Banks; Traders Anticipate Fed Rate Cuts As Stocks React

With the median American tenant paying $2,147 in rent, according to Zillow data, residents are desperately hoping for a drop in rent prices that could come if <a href="https://www.benzinga.com/real-estate">home vacancies rise</a>.
As per U.S. census data, more than half of U.S. renters pay over 30% of their income in rent, crossing the line where rental units stop being considered affordable.
The situation is prompting renters to <a href="https://www.benzinga.com/real-estate/24/06/39161182/renters-are-staying-longer-amid-rising-housing-costs-and-high-mortgage-rates">remain in their rental units</a> for extended periods, aiming to minimize rent increases. This trend is also a result of historically high mortgage rates, which are deterring tenants from securing loans for their first homes.
The measures, however, change drastically depending on the location. New York City continues to be one of the less affordable locations for tenants, with workers that earn as much as $135,000 a year still <a href="https://www.benzinga.com/real-estate/24/05/39091231/rents-are-so-high-in-new-york-city-that-even-135kyear-tech-workers-cant-keep-up">unable to afford 65% of the city's available properties</a>.
In California, <a href="https://www.benzinga.com/real-estate/24/05/39087152/national-rental-rates-climb-1-2-in-may-breaking-20-month-streak">large cities are seeing a decline in annual rental rates</a>. Annually, Oakland was down 9.1%, Sacramento dropped 8.1% and Los Angeles declined 5%.
Read also: <a href="https://www.benzinga.com//node/39040957">US Home Prices Hit All-Time Highs, Fastest Growth Rate In A Year: &#8216;We&#8217;ve Witnessed Records Repeatedly Break&#8217;</a>
<h3 class="wp-block-heading">Will Rents Cool Down?</h3>
The vacancy rate is a key measure to look at when trying to assess the course of rental prices.
A higher number of vacant homes puts pressure on landlords to drop prices in order to find tenants for their empty properties.
According to data from the St. Louis Fed, vacancies across the country during the first quarter of 2024 came in at a rate of 6.6%, the same as the two previous quarters and higher than any other period since mid-2021.
This measure is higher than the annual averages for 2020, 2021, 2022 and 2023.
While vacancies across the country have not declined in recent months, they remain below the historical national average, which has been 7.3% since 1956.
The level of vacancies varies greatly between states.
"Western and Northeastern states have the lowest rental vacancy rates in the country, accounting for 14 out of 15 states with the lowest vacancy rates—all of which have rental vacancy rates of 4.9% or lower," according to a Monday <a href="https://constructioncoverage.com/research/cities-with-the-highest-rental-vacancy-rates">report</a> by Construction Coverage, which looked at the most recent data on housing vacancies and rent prices across the country.
The highest vacancy rates are in Southern and Midwestern states, where 14 of the 15 states with the highest rental vacancy rates are located.
A rise in construction could help bring rent prices down since the market is injected with new supply of available homes, which increase vacancies.
Housing starts, a measure that looks at how many projects began construction in a given period of time, saw a slight uptick in April, but 2023 and 2022 averages were below 2021 levels and this year doesn't look to be leading up to breaking recent records.
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/39007410/when-will-the-fed-cut-interest-rates-were-in-the-middle-of-the-road-path-of-cutting">If the Fed begins cutting down interest rates</a> this year, more tenants would leave their contracts for a first home, increasing the number of vacant properties.
Arkansas, Indiana, South Carolina, Alabama and Texas are the states with the highest rate of vacant homes, all above 9%.
Massachusetts, Maine, New Jersey, Vermont and Kentucky have the lowest rate of vacancies, all at 3.5% or below.
Median rent prices have shown an uptick this year so far, as per Zillow, after a drop that lasted the entire second half of 2023. Prices could start to cool down again if vacancies continue to grow or remain higher than in previous years.
The largest ETFs following the real estate sector are Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) and Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>).
Now read: <a href="https://www.benzinga.com//node/39100910">Home Sellers Slashing Prices At Fastest Rate In Nearly Two Years: What&#8217;s Going On?</a>
Image generated using artificial intelligence via Midjourney.

Will Rent Prices Finally Cool Down? Key Indicator Offers Hope, But Major Cities Remain Unaffordable

The European Central Bank is universally <a href="https://www.benzinga.com//node/39029946">expected to cut interest rates for the Euro area this week</a>.
Cutting back on interest rates for the first time in two decades can be seen as a positive sign for the dwindling European economy, which has been hit by slow growth and poor demographic patterns.
Average inflation in Euro area countries has been mostly on a downward trend since last year, reaching an annual 2.4% in both March and April, down from a peak of 10.6% in October 2022.
The measure, however, is very dynamic within the block, with figures as low as 0.4% for Lithuania and as high as 4.9% in Belgium.
The ECB commenced its latest rate hike cycle in July 2022. Key ECB interest rates, the European counterpart for the federal funds rate, was hiked a total of 10 times and now stands at 4%. The same rate has been kept steady since September of last year.
June's cut will bring the rate down by 25 basis points to a floor of 3.75%.
Yet the steady pace towards the ideal measure of 2% annual inflation might be hitting a roadblock this month, as Eurostat, the block's main statistics office, is estimatfing that May's inflation has gone up to 2.6%, above estimates of 2.5%.
If the measure is confirmed, it won&#8217;t interfere with plans to lower interest rates. It might influence a decision by the ECB to pause rates during July and slow the speed of rate cuts down the line.
Bloomberg Economics has <a href="https://www.bloomberg.com/news/articles/2024-06-01/central-banks-latest-world-rate-paths-set-to-diverge-with-ecb-s-first-cut?sref=TBDibEcD">forecast</a> a pause in July and further cuts in September, October and December.
Read Also: <a href="https://www.benzinga.com/news/24/05/38951699/eu-approves-3-5b-in-frozen-russian-assets-for-ukraine-janet-yellen-has-a-plan-to-increase-amount-by">EU Approves $3.5B In Frozen Russian Assets For Ukraine: Janet Yellen Has A Plan To Increase Amount By Over 10X</a>
<h3 class="wp-block-heading">What This Means For US</h3>
Timing for the EU's latest inflationary cycle is in line with the U.S.'s wave of price increases. Both territories have been subject to the same variables. Energy prices, for example, are affected by the Ukraine/Russia war.
Yet the block's inflation is easing faster than in the U.S.
<a href="https://www.benzinga.com/markets/equities/24/05/38842603/us-inflation-falls-as-expected-in-april-bolsters-fed-rate-cut-bets">Yearly U.S. inflation was 3.4% in April</a>, down from 3.5% in March. 
On Friday, the Fed's preferred measure for inflation, the Personal Consumption Expenditure, was released for the month of April, showing <a href="https://www.benzinga.com/economics/macro-economic-events/24/05/39110198/feds-preferred-inflation-gauge-matches-estimates-personal-income-spending-slow-mo">a steady course, with a 2.7% annual rise as compared to the previous year</a>.
In a Monday interview, Minneapolis Fed President Neel Kashkari advocated for maintaining the current Fed funds rate in the U.S. for a longer period <a href="https://www.benzinga.com/24/06/39131539/feds-neel-kashkari-advocates-for-no-interest-rate-cut-until-we-get-a-lot-more-data-to-convince-us-am">to avoid the risk of jeopardizing U.S. economic prosperity</a>.
The EU's decision will further widen the gap with the cost of borrowing in the U.S., where the federal funds rate now stands at between 5.25% and 5.5%.
Canada is also expected to slash rates this week, in a decision to be confirmed on Wednesday, also widening the gap of borrowing cost across the Northern border, putting further pressure on the Fed to begin slashing rates sooner rather than later.
Canada's annual inflation rate also shows a better trajectory than its American counterpart, having dropped to 2.7% in April, down from 2.9% in March.
An upcoming <a href="https://www.benzinga.com/topic/jobs-report">jobs report</a> this Friday will further inform the Fed in its upcoming decisions. Economists are estimating the creation of 190,000 jobs in May.
<h3 class="wp-block-heading">Stocks And Other Assets To Watch </h3>
Fixed-income securities like government bonds tend to go up as interest rates are slashed.
Their prices will likely be affected by expectations around upcoming rate cuts in the U.S.
Last week, Bank of America chief investment strategist Michael Hartnett said <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/39116124/bank-of-america-strategist-shifts-to-bonds-stock-sell-off-prophecy-on-benign-inflat">he's bullish on bonds for the second half of the year as expectations</a> on rate cuts grow and may even become realized.
He said to "buy any dip in bond prices," while recommending to "sell the first cut" for stocks.
While there are many ways to <a href="https://www.benzinga.com/money/how-to-buy-bonds">buy government bonds</a>, investors can also access the bond market by purchasing bond ETFs like iShares Core US Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>) and Vanguard Total Bond Market Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BND#NASDAQ">BND</a>).
<h3 class="wp-block-heading">Real Estate</h3>
The real estate market has been <a href="https://www.benzinga.com//node/39110330">one of the worst hit by the recent wave of rate increases</a>, as the cost of borrowing for both commercial and personal building and renovation has skyrocketed.
Expectations on rate cuts could turn out to be a lifeline for the sector, which is covered by ETFs like Vanguard Real Estate Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), Schwab US REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHH#NYSE">SCHH</a>) and Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>).
Now read: <a href="https://www.benzinga.com//node/38934737">EU Enacts World&#8217;s First AI Regulation, First Compliance Trigger Will Aim To Tackle AI Systems That Pose &#8216;Unacceptable&#8217; Risk</a>
Shutterstock image.

Eurozone

Pressure Mounts On Fed As Eurozone, Canada Plan Interest Rate Cuts This Week

U.S. home prices surged to a new peak in March 2024, recording the highest annual growth rate <a href="https://www.benzinga.com/real-estate">in over a year. </a>
The S&amp;P CoreLogic Case-Shiller 20-city home price index — a key gauge to track the home prices of typical single-family units in the U.S. — increased by 7.4% year-on-year, notching the highest rise since October 2022 and surpassing market expectations of 7.3%. 
This marked the ninth consecutive month of rising home prices.
The S&amp;P CoreLogic Case-Shiller U.S. National Home Price Index, which encompasses all nine U.S. census divisions, recorded a 6.5% annual gain in March, matching the increase from the previous month. 
The 10-City Composite saw an annual increase of 8.2%, up from 8.1% in February.
Notably, all metropolitan areas recorded a positive monthly growth in March. Among the 20 cities tracked:
<ul>
<li>San Diego reported the highest year-over-year gain with an 11.1% increase in March. </li>
<li>New York and Cleveland followed with increases of 9.2% and 8.8%, respectively. </li>
<li>Denver maintained the lowest rank for year-over-year growth but reported a steady 2.1% annual increase for the third consecutive month.</li>
</ul>
<h3 class="wp-block-heading">Analysis Of Current Home Prices </h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>Metropolitan Area</th>
<th>March 2024 Index Level</th>
<th>March 2024 1-month change (%)</th>
<th>March 2024 1-year change (%)</th>
</tr>
</thead>
<tbody>
<tr>
<td>Atlanta</td>
<td>243.56</td>
<td>1.1%</td>
<td>6.1%</td>
</tr>
<tr>
<td>Boston</td>
<td>328.21</td>
<td>1.9%</td>
<td>8.7%</td>
</tr>
<tr>
<td>Charlotte</td>
<td>273.59</td>
<td>1.0%</td>
<td>7.5%</td>
</tr>
<tr>
<td>Chicago</td>
<td>271.50</td>
<td>1.7%</td>
<td>8.7%</td>
</tr>
<tr>
<td>Cleveland</td>
<td>185.41</td>
<td>2.4%</td>
<td>8.8%</td>
</tr>
<tr>
<td>Dallas</td>
<td>295.01</td>
<td>1.2%</td>
<td>3.6%</td>
</tr>
<tr>
<td>Denver</td>
<td>315.66</td>
<td>1.3%</td>
<td>2.1%</td>
</tr>
<tr>
<td>Detroit</td>
<td>181.87</td>
<td>1.1%</td>
<td>7.7%</td>
</tr>
<tr>
<td>Las Vegas</td>
<td>289.21</td>
<td>0.9%</td>
<td>7.7%</td>
</tr>
<tr>
<td>Los Angeles</td>
<td>433.59</td>
<td>1.7%</td>
<td>8.8%</td>
</tr>
<tr>
<td>Miami</td>
<td>433.23</td>
<td>1.0%</td>
<td>8.2%</td>
</tr>
<tr>
<td>Minneapolis</td>
<td>235.35</td>
<td>1.3%</td>
<td>3.3%</td>
</tr>
<tr>
<td>New York</td>
<td>300.27</td>
<td>1.5%</td>
<td>9.2%</td>
</tr>
<tr>
<td>Phoenix</td>
<td>324.53</td>
<td>0.5%</td>
<td>4.9%</td>
</tr>
<tr>
<td>Portland</td>
<td>323.64</td>
<td>1.5%</td>
<td>2.2%</td>
</tr>
<tr>
<td>San Diego</td>
<td>438.00</td>
<td>2.2%</td>
<td>11.1%</td>
</tr>
<tr>
<td>San Francisco</td>
<td>355.52</td>
<td>2.6%</td>
<td>4.9%</td>
</tr>
<tr>
<td>Seattle</td>
<td>380.26</td>
<td>2.7%</td>
<td>7.8%</td>
</tr>
<tr>
<td>Tampa</td>
<td>381.85</td>
<td>0.5%</td>
<td>3.8%</td>
</tr>
<tr>
<td>Washington</td>
<td>321.73</td>
<td>1.3%</td>
<td>7.0%</td>
</tr>
</tbody>
<tfoot>
<tr>
<td>Composite-10</td>
<td>341.75</td>
<td>1.6%</td>
<td>8.2%</td>
</tr>
<tr>
<td>Composite-20</td>
<td>325.09</td>
<td>1.6%</td>
<td>7.4%</td>
</tr>
<tr>
<td>U.S. National</td>
<td>316.65</td>
<td>1.3%</td>
<td>6.5%</td>
</tr>
</tfoot>
</table>
<figcaption class="wp-element-caption">Data: S&amp;P Dow Jones Indices and CoreLogic</figcaption></figure>
See Also: <a href="https://www.benzinga.com/real-estate/24/05/39029109/rent-in-the-city-invest-in-the-suburbs-the-rise-of-rentvesting">Rent In The City, Invest In The Suburbs — The Rise Of &#8216;Rentvesting&#8217;</a>
Overall, U.S. house prices have soared by 136% from the trough seen in 2012 and are 71.5% higher than the 2006 peak. 
For the 20-City Composite, prices have surged by 142.5% from the 2012 trough and by 57.4% from the 2006 peak. 
The 10-City Composite has increased by 133.4% from the 2012 trough and by 51.0% from the 2006 peak.
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>Category</th>
<th>Peak Index Level</th>
<th>Peak Date</th>
<th>Trough Index Level</th>
<th>Trough Date</th>
<th>Change from Peak (%)</th>
<th>Current Index Level</th>
<th>Change from Trough (%)</th>
<th>Change from Peak (%)</th>
</tr>
</thead>
<tbody>
<tr>
<td>National</td>
<td>184.61</td>
<td>Jul-06</td>
<td>134.00</td>
<td>Feb-12</td>
<td>-27.4%</td>
<td>316.65</td>
<td>136.3%</td>
<td>71.5%</td>
</tr>
<tr>
<td>20-City</td>
<td>206.52</td>
<td>Jul-06</td>
<td>134.07</td>
<td>Mar-12</td>
<td>-35.1%</td>
<td>325.09</td>
<td>142.5%</td>
<td>57.4%</td>
</tr>
<tr>
<td>10-City</td>
<td>226.29</td>
<td>Jun-06</td>
<td>146.45</td>
<td>Mar-12</td>
<td>-35.3%</td>
<td>341.75</td>
<td>133.4%</td>
<td>51.0%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: S&amp;P Dow Jones</figcaption></figure>
<h3 class="wp-block-heading">Expert&#8217;s Take</h3>
Brian D. Luke, head of commodities, real &amp; digital assets at S&amp;P Dow Jones Indices, emphasized the robust performance of the housing market.
"This month's report boasts another all-time high. We've witnessed records repeatedly break in both stock and housing markets over the past year. Our National Index has reached new highs in six of the last 12 months,&#8221; he said. &#8220;During that time, we've seen record stock market performance, with the S&amp;P 500 hitting fresh all-time highs for 35 trading days in the past year."
Among the highlights:
<ul>
<li>San Diego&#8217;s impressive 11.1% annual gain is a standout</li>
<li>New York and Los Angeles make up about 30% of the 20-City Composite and have shown significant recovery, matching the national composite annualized return of 9.9% since 2020. </li>
<li>San Francisco and Seattle have not yet fully recovered from their previous highs, being 9.7% and 8.2% lower than their May 2022 peaks, respectively.</li>
<li>The Northeast region remains the top performer with an 8.3% annual gain. </li>
<li>Tampa, Phoenix, and Dallas experienced significant growth in 2020 and 2021; they now show slower growth rates.</li>
</ul>
&#8220;COVID was a boom for Sunbelt markets, but the bigger gains the last couple of years have been the northern metro cities," Luke stated.
<h3 class="wp-block-heading">Market Reactions</h3>
Both the Real Estate&nbsp;Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) and the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>) rose 0.8% Tuesday, outperforming all other S&amp;P 500&#8217;s sectors excluding energy. 
Stock-wise, the best performers were Redfin Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/RDFN#NASDAQ">RDFN</a>), eXp World Holdings, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/EXPI#NASDAQ">EXPI</a>) and Orion Office REIT Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ONL#NYSE">ONL</a>) with gains of 4.5%, 4.2% and 3.1%, respectively. 
Now Read: <a href="https://www.benzinga.com/markets/equities/24/05/39010704/hedge-funds-tweak-portfolios-in-q1-marvell-td-synnex-aes-get-more-love-as-focus-shifts-to-ai">Hedge Funds Tweak Portfolios In Q1: Marvell, TD Synnex, AES Get More Love As Focus Shifts To AI</a>
Image: Shutterstock

Market Summary

RDFN

US Home Prices Hit All-Time Highs, Fastest Growth Rate In A Year: 'We've Witnessed Records Repeatedly Break'

Overall optimism toward the U.S. stock market among retail traders has softened in the <a href="https://www.benzinga.com/topic/retail-traders">second quarter (Q2) of 2024</a>.
Some 46% of retail traders expressed a bullish outlook — a decrease from 53% in Q1, according to the latest Trader Sentiment Survey from Charles Schwab. 
Inflation is their top concern, rising from 9% to <a href="https://www.benzinga.com/topic/inflation">19% quarter-over-quarter.</a>
The survey incorporated responses from 920 active traders holding retail assets of at least $2,000 with Schwab. 
<h3 class="wp-block-heading">Key Highlights</h3>
<ul>
<li>Fed rate cuts: Trader expectations regarding interest rate cuts have moderated significantly. Only 25% of traders now anticipate more than two rate cuts by year-end. That&#8217;s a stark decline from 47% in Q1. Meanwhile, the proportion of traders who believe the Federal Reserve will not cut rates this year has surged to 32%. That&#8217;s up from just 10% in the previous quarter. The unexpected inflation increases in the first quarter and recent signals from Fed officials about the risk of prolonged high interest rates have influenced traders&#8217; <a href="https://www.benzinga.com/topic/interest-rates">expectations regarding rate cuts.</a></li>
<li>Recession fears abate: While 36% of traders still see a recession as likely in 2024, more than half now consider it unlikely. As such, 40% of them believe in the Fed&#8217;s ability to achieve a soft landing. </li>
<li>Energy vs. Real Estate: Bullish sentiment in the energy sector, as tracked by the The Energy Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLE#NYSE">XLE</a>), has reached 64% — the highest among all sectors. Only 11% are bearish. That&#8217;s in stark contrast to the real estate sector, as monitored through the Vanguard Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VNQ#NYSE">VNQ</a>), where 52% are bearish and 19% are bullish.</li>
<li>Mixed AI sentiment: Despite 56% of traders remaining bullish on AI stocks, there is growing concern about overvaluation. About 44% view AI as the most crowded trade.</li>
<li>High interest in options trading: Approximately two-thirds of traders plan to engage in options trading in 2024. Interest in zero days-to-expiration (0DTE) options remains low at 13%.</li>
<li>Increased research and vetting time: More traders are spending additional time vetting or researching trades before execution due to their economic expectations.</li>
<li>Cryptocurrency skepticism: A significant 79% of traders perceive cryptocurrencies as risky, speculative investments. Nearly two-thirds are uncertain about the future of cryptocurrencies as an asset class, and only 17% consider them smart investments.</li>
</ul>
Overall, Schwab&#8217;s Q2 2024 Trader Sentiment Survey underscores a shifting landscape for retail traders compared to the previous quarter, marked by growing inflation concerns and moderated expectations for rate cuts.
Despite these uncertainties, traders continue to seek opportunities, particularly in individual stocks and energy. They maintain a cautious stance on <a href="https://www.benzinga.com/real-estate">cryptocurrencies and real estate</a>.
Now Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/38989066/us-business-activity-resurges-in-may-largest-rise-in-2-years-but-return-to-feds-2-t">US Business Activity Resurges In May, Return To &#8216;Fed&#8217;s 2% Target Still Seems Elusive&#8217;</a>
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