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.
November Fade
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.
DRV seeks daily investment results equal to 300% of the inverse of the daily performance of the MSCI US REIT Index, which is a free float-adjusted market capitalization weighted index that is comprised of equity REITs that are included in the MSCI US Investable Market 2500 Index.
“Meanwhile, Duke Realty stock has been the worst S&P 500 member to own in November, ending the month higher just 10% of the time, and averaging a steep monthly loss of 7.65%, per data from Schaeffer’s Senior Quantitative Analyst Rocky White. Kimco shares aren’t far behind, ending November higher just 20% of the time, with an average loss of 6.07%,” according to Schaeffer’s.
Shares of DRE and KIM combine for 1.65% of IYR’s weight.
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