Last month it erased the gains in the stock price recorded during the summer
Taken from TRD New York
It wasn't exactly a September to remember for real estate investors.
Shares in real estate companies fell from record highs this month to end the third quarter where they began, erasing gains from July and August.
The decline in market capitalization was caused by multiple factors, from Chinese-owned overleveraged developers to a persistent Delta variant and the Federal Reserve suggesting it would reduce its support for the economy – including the mortgage market – next November.
The aggregate price of shares in publicly traded real estate companies fell 0.25 percent during the third quarter after posting a 9 percent gain in early September, according to the Real Estate Select Sector Index, which matches the price performance of shares in publicly traded real estate companies.
Retail and hotel REITs gained during the quarter as the economy continued to reopen. Office properties underperformed, trading at a 16 percent discount to consensus asset values, according to John Kim, REIT analyst at BMO. Meanwhile, REITs overall are trading at a 7 percent premium to their asset values.
“Fears about the Delta variant are subsiding, and clarity on when and how workers will return to the office should emerge in the next three to six months,” Kim said.
Homebuilders' stock behaved similarly, falling 3 percent during the quarter after gaining 6 percent earlier this month, the S&P Homebuilders ETF showed.
Homebuilding giant Lennar said supply chain disruptions resulted in it delivering fewer homes than it had forecast. “Supply is tight and demand is strong,” said company president Stuart Miller during earnings call , adding that he expected supply chain delays to continue. As a result, home prices have experienced historic inflation.
While real estate can protect against inflation by storing value that increases along with the prices of other assets, the economic disruptions caused by Covid have prevented investors from rushing in despite the threat of continued inflation.
Markets rose on Friday, the first day of the fourth quarter, but ended the week still down.
