Real estate stocks close a volatile week roughly flat (NYSEARCA:XLRE)

Real estate stocks ended a volatile week largely flat, with The Real Estate Select Sector SPDR Fund ETF (NYSEARCA:XLRE) retreating 0.12% from the prior week to close at 41.81.

The ETF gained in three out of the five trading sessions, with a significant gain of 2.21% recorded on Tuesday after Monday’s selloff.

“Last week’s weak U.S. payroll report combined with rising jobless claims induced fears of U.S. recession. At the same time, the latest BoJ rate hike induced fears of broader unwinding of the Japanese yen carry trade which had previously been used to fund both Japanese and foreign assets. The combined effect of rising U.S. recession risk and unwinding of the broader Japanese yen carry trade triggered a correction in risk assets in particular equities and a rally in safe assets such as government bonds, the yen and Swiss franc,” said JPMorgan’s Nikolaos Panigirtzoglou.

Monday, which saw the XLRE shed 2.89% to finish at 40.65, logged three S&P 500 REIT downgrades.

Real Estate Space

Industrial real estate firm Jones Lang LaSalle said in a report that fundamentals such as absorption of warehouse and distribution space, vacancy rates, deliveries of new properties and subleasing activity slowed in Q2.

Retailers, manufacturers and logistics providers need more clarity on the direction of the U.S. economy and consumer spending, before deciding on short-term needs for warehouse space, according to the report.

On a positive note, mortgage rates dropped to their lowest level in over a year on “likely overreaction” to the recent employment report.

“The decline in mortgage rates does increase prospective homebuyers’ purchasing power and should begin to pique their interest in making a move,” said Freddie Mac’s chief economist, Sam Khater.

Notably, not many housing experts see rates receding meaningfully in the coming months, even if the Federal Reserve cuts the benchmark rate in September, an Aug. 9 report from Forbes showed.

Subsector Performance

Seeking Alpha’s Quant Rating system maintained its Buy rating on XLRE, while SA analysts continue to grade the fund as Hold.

Telecom tower REITs SBA Communications (SBAC), American Tower (AMT) and Crown Castle (CCI) dragged the Specialized subsector down.

The subsector was the biggest loser of the week, having declined by 1.72% from the prior week.

Health care REITs Ventas (VTR) and Welltower (WELL) and retail REIT Simon Property Group (SPG) were the notable winners, leading to health care and retail subsectors posting the maximum gains. Health care rose 3.32%, while the retail advanced 2.61%.

Simon Property and Realty Income (O) topped consensus estimates for earnings this week.

Here is a look at the subsector performance: