Interest rate hikes resulted in third-quarter losses for most real estate investment trusts (REITs).
With the Federal Reserve taking short-term rates up by 0.75% and 30-year fixed mortgage rates nearing 7%, REITs headed down in price. The expectation that even higher rates are on the way is not helping.
The iShares US Real Estate Select Sector ETF (NYSEARCA: IYR) is regarded as a benchmark for the industry. The exchange-traded fund (ETF) is diversified with 83 holdings in the portfolio. Average daily volume of 6.1 million shares makes it liquid enough so that large institutional firms can participate.
Here’s the daily price chart:
It started out the third quarter at $92 and now goes for $81, a 12% drop in just three months. That the end-of-quarter low is below the mid-June low is a problem: Lower highs and lower lows equal a bear market. That the relative strength index (RSI) (below the price chart) is dipping into the oversold level might be viewed as a positive.
Equinix Inc. (NASDAQ: EQIX) invests in data centers globally with major U.S. operations centers in New York, Chicago, Los Angeles and other large metropolitan areas. The company pays a dividend of 2.21%. Equinix is traded on the Nasdaq Stock Market with an average daily volume of just 425,000 shares.
The daily price chart looks like this:
Both the 50-day moving average and the 200-day moving average are headed down and price is well below the two. This is a bearish look, for sure. Also, the September lows took out the June and July lows — breaking previous support like this is bad news. The Equinix relative strength indicator is in oversold territory. At the start of the quarter, the price stood at $670 and now stands at $568 for a three-month 15.22% drop.
Public Storage (NYSE: PSA) is an industrial REIT offering self-storage, business storage, climate-controlled storage and vehicle storage. Based in Glendale, California, the company has storage facilities in locations throughout the United States. Public Storage pays a dividend of 2.78%. Average daily volume is 691,000 shares.
Here’s the daily price chart:
The REIT started July at $300 and ended September at $293 for 2.33% quarterly loss. The price chart looks better than the above two because it’s managed to stay above the mid-June lows. So, now “lower low” for Public Storage even as it stays beneath the two significant moving averages.
Realty Income Corp. (NYSE: O) is a REIT operating under long-term net lease agreements with commercial clients. The company pays a 5.14% dividend. Average daily volume is 3.79 million shares and institutional investors own 81.6% of the float.
The daily price chart is here:
This one is in the deep oversold range as revealed by the relative strength indicator below the price chart. Note how the May and June lows were easily taken out in a wave of September selling. It’s not good news that both moving averages are beginning to turn downward. Public Storage began the third quarter at $69 and now trades at $58 for a loss in three months of 15.9%.
Not investment advice. For educational purposes only.
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