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A cycle in Real Estate that traders should be aware of

Jay Kaeppel
2026-10-06
The real estate sector has been a dreadful laggard in recent years - and for good reason (high home prices, rising mortgage rates, remote work impacting commercial real estate, etc.). Is it time for contrarians to load up? Not necessarily. Nevertheless, shorter-term traders might be looking at an opportunity. Details herein.

Key points

  • The Real Estate sector has been a massive underperformer for quite some time; Remote work has impacted commercial real estate, and high home prices and rising mortgage rates have chilled the residential market
  • Trying to pick the exact bottom in the Real Estate sector versus the broader market is a fool's errand
  • Nevertheless, history suggests that there is one reason for shorter-term traders to consider a position now in this downtrodden sector

The real estate sector has been a laggard

To measure the real estate sector's performance in the tests below, we will use the Fama-French Index database from 1959 to 1991 and then the S&P 500 Real Estate sector after that. The Real Estate Select Sector SPDR Fund (ticker XLRE) tracks this index and appears as the red line in the chart below. The blue line shows the action for ticker SPY, an ETF that tracks the S&P 500 Index.

The Real Estate sector index (the red line in the top clip of the chart below) is essentially unchanged from where it was six years ago. The bottom chart shows real estate performance relative to the S&P 500. It has clearly been, and continues to be, a massive underperformer.

A cycle in Real Estate that traders should be aware of

Is it time to "pick the b

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