Real estate investment trusts (REITs) and the related exchange traded funds, including the iShares US Real Estate ETF (NYSEArca: IYR), are viewed as vulnerable to rising interest rates.
The Federal Reserve has boosted rates three times this year and a fourth rate hike is widely expected in December, but some real estate ETFs have been surprisingly solid in recent weeks. IYR is up more than 1% over the past week, but historical data suggest investors may not want to be holding that fund when November arrives.
IYR seeks to track the investment results of the Dow Jones U.S. Real Estate Index and generally invests in securities of the underlying index and in depositary receipts representing securities of the underlying index. The index measures the performance of the real estate sector of the U.S. equity market and may include large-, mid- or small-capitalization companies.
“The IYR has averaged a November loss of 2.22%, and has ended the month higher just 30% of the time in the past 10 years — making it among the worst exchange-traded funds (ETFs) to own in November, historically,” according to Schaeffer’s Investment Research.
Traders looking to play a potential November slide in real estate stocks can consider the Direxion Daily MSCI Real Est Bear 3X ETF (NYSEArca: DRV), which tracks a different index than IYR.