Like other high-yielding asset classes, REITs are viewed as sensitive to interest rate increases. The Federal Reserve has boosted borrowing costs twice this year, with most recent coming in June, and many bond market observers believe a third rate hike will arrive before 2017 is over.
“IYR shares have been in a channel of higher lows and highs since their late 2016 bottom, muscling about 8% higher in the last year, with pullbacks contained by their 80-week moving average. The ETF was last seen 0.2% lower at $81.86, and just touched an annual high of $83 earlier this month. Another 2.21% rally from current levels would put IYR around $83.67 — deeper into new-high territory, and within striking distance of 2016’s all-time highs,” according to Schaeffer’s.
Another interesting catalyst could help IYR, which is one of the largest real estate ETFs, over the near-term.
“A short squeeze could also help IYR higher, should these bears abandon ship. Short interest surged nearly 20% in the last reporting period, and now represents about a week’s worth of pent-up buying demand, at the ETF’s average daily trading volume,” notes Schaeffer’s.
For more information on real estate investment trusts, visit our REITs category.