US Real Estate Stocks Hit Record Low vs S&P 500 as Rates Weigh

Relative to the S&P 500, US real estate stocks are weaker than at any point on record. The ratio of the two sectors stands at 0.122, and every bit of outperformance that property shares had piled up before 2007 has now been erased.

This is a relative decline, however, not a collapse in home prices. The gap between broad US equities and property reflects nearly two decades of divergence.

How the Housing-Bubble Advantage of US Real Estate Stocks Disappeared

The record low was flagged on X by Charlie Bilello, chief market strategist at Creative Planning. His calculation relies on two total-return indexes.

One is the iShares US Real Estate ETF (IYR), whose holdings include real estate investment trusts (REITs) and property companies. On the other side is the SPDR S&P 500 ETF (SPY).

When the ratio rises, property is beating the wider market. The reading reached roughly 0.46 in February 2007, closing out a long stretch of housing-boom outperformance.

Within months, the subprime mortgage crisis began to bite.

Since that peak, the ratio has dropped by about 73%. US property stocks have therefore surrendered all of their relative gains from the early-2000s real estate boom.

Borrowing costs are compounding the problem. According to Freddie Mac's weekly survey, the average 30-year fixed rate reached 7.28% on October 1, the highest level since November 2023.

Daily figures from lenders had already signaled a sharp increase in mortgage rates in late September. At the same time, the Federal Reserve has resumed raising interest rates.

Higher rates damage REITs twice over. They increase debt costs and make dividend payouts look less inviting relative to bonds.

Why Schiff Expects Property Shares to Keep Falling

Peter Schiff, chief economist at Euro Pacific Asset Management, responded that the sector still has a long way to fall. Real estate, he says, lived on mortgage rates that kept declining and on government support.

Both tailwinds, in Schiff's view, have started to reverse. His description of the industry: “dead.”

Plus they are going a lot lower from here. The industry is dead. It lived by ever falling mortgage rates and government subsidies. It's now dying by reversal of the same dynamics.

— Peter Schiff (@PeterSchiff) October 5, 2026

Bilello's ratio, however, measures only relative performance. A technology-led rally in the S&P 500 can pull the ratio down even when real estate shares are advancing.

Households are following a similar path. A record slice of US household wealth is now in equities, while home equity's share has shrunk.

In the end, the interest-rate environment matters more than any single indicator. With the 10-year Treasury yield above 5%, investors can collect reliable income while avoiding property risk. That trade-off may keep weighing on US real estate stocks until rates move lower.