US real estate stocks have dropped to their weakest level ever against the S&P 500. A ratio comparing the two sectors now sits at 0.122, wiping out the entire lead property shares built before 2007.
However, the slide is relative, not a crash in home prices. It shows how far broad US equities have pulled ahead of real estate over almost two decades.
How US Real Estate Stocks Lost Their Housing-Bubble Edge
Charlie Bilello, chief market strategist at Creative Planning, flagged the record low on X. His chart compares two total return indexes.
The first is the iShares US Real Estate ETF (IYR), which holds real estate investment trusts (REITs) and property firms. The second is the SPDR S&P 500 ETF (SPY).
A rising ratio means real estate is beating the broader market. The reading climbed to about 0.46 in February 2007, capping a housing-boom run of outperformance.
The subprime mortgage crisis took hold months later.
The measure has shed roughly 73% from that peak. As a result, US real estate stocks no longer hold any of the relative gains they banked during the early-2000s property boom.
Financing costs add to the strain. Freddie Mac’s weekly survey put the average 30-year fixed rate at 7.28% on October 1, the highest since November 2023.
Daily lender data had already flagged a sharp mortgage rate jump in late September. Meanwhile, the Federal Reserve has returned to rate hikes.
Higher rates hurt REITs twice. They raise debt costs and make dividend payouts look less attractive next to bonds.
Why Schiff Sees No Floor for Property Shares
Peter Schiff, chief economist at Euro Pacific Asset Management, replied that the sector has much further to fall. He says real estate thrived on steadily falling mortgage rates and government support.
Both of those tailwinds are now reversing, Schiff argues. He called the industry “dead.”
Still, Bilello’s ratio tracks relative returns only. A tech-led S&P 500 rally can push the ratio lower even when property shares post gains.
Households are making a similar shift. Stocks now account for a record share of US household wealth, while the home equity share has slipped.
Ultimately, the rate backdrop matters more than any single chart. The 10-year Treasury yield sits above 5%, so investors can earn solid income without property risk. That trade-off could weigh on US real estate stocks until rates turn lower.
