Weekly Real Estate Outlook - June 2025
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In the world of finance, markets are always dancing to the tune of economic shifts, geopolitical maneuvers, and the whims of the almighty Fed. This week saw a big ol' cha-cha-cha as equity markets hit all-time highs, interest rates dipped to two-month lows, and the economy hummed along with a rhythm that was, in a word, confusing. Let's cut to the chase and break it down, shall we?
Downtown, Wall Street is jumping jive
U.S. equity markets were in the money this week, with the U.S. stock markets surging to fresh record-shattering heights as investors got all ya-hoo over a medley of positive headlines. From a temporary truce in the Middle East to productive trade talks with China and the EU, and progress on the GOP's sweeping tax and spending bill, the good news was flowing like a river. And oil prices, they took a tumble after the U.S. knocked over a trio of Iranian nuclear facilities over the weekend, leaving things nice and hot between Israel and Iran and making it seem like we were headed for another waltz into another quagmire. But traders priced in additional rate cuts as they shook their heads over tumbling oil prices and economic data that remained devoid of any real inflation, prompting dovish dissents from several Fed officials and causing them to question Chair Powell's insistence on tariff-driven inflation.
S&P 500 ain't got nothing on me!
Snapping a two-week losing streak and posting fresh all-time highs for the first time since February 19, the S&P 500 rocked a 3.5% pas de deux this week, pushing its rebound from the post-liberation day bottom on April 8 to over 20%. Aided by the official signing of a trade truce with China, mega-cap technology stocks led the party, lifting the Nasdaq 100 to gains exceeding 4%. Gains were broad-based across market tiers, with the Small-Cap 600 and Mid-Cap 400 each posting gains of around 3%. But Energy stocks danced a tango with plummeting oil prices, while Real Estate equities were lagging as they got the cold shoulder from data center REITs and NYC-focused REITs after that far-left socialist, Mamdani, pulled off a stunning primary victory. The Equity REIT Index was in the doghouse with 11-of-18 property sectors posting losses, with the Mortgage REIT Index being the only one catching a break with a 1.5% rally. Single-family homebuilders, however, staged a comeback as mortgage rates tumbled to two-month lows, providing some relief despite a disappointing slate of housing market data.
Benchmark yields fall off wall
Benchmark yields took a tumble this week as money markets fully priced in two Fed rate cuts by the end of 2025, with odds of a July cut nearing 20%. The 10-Year Treasury Yield dipped by 11 basis points to close at 4.27%, making it the fourth week in a row that it has retreated since hitting four-month highs of 4.60% on May 21. The 2-Year Treasury Yield tumbled by 17 basis points to close at 3.73%, hovering around its lowest levels since October 2020. Fuel for the retreat in yields came courtesy of WTI Crude Oil, which plummeted nearly 12% on the week to around $65 a barrel, sending the primary disinflationary input hurtling back into negative territory for the year. As for the VIX, it took a twirl down to around 16 this week after soaring to 52 at the height of the tariff-fueled turmoil in April. The U.S. Dollar dipped to new three-year lows on hopes of easier monetary policy, with swaps markets now implying a Fed Funds Rate of 3.86% at the end of 2025 (versus 4.50% now), almost suggesting a significantly more dovish outlook compared to the 2.0 rate cuts implied last week.
So, what's the score?
Below, we recap the most important economic data points over this past week affecting the residential and commercial real estate market.
Not much inflation
The Federal Reserve's preferred inflation gauge, the Core PCE Price Index, showed a slight pick-up in inflation in May, but it still remained consistent with the earlier CPI and PPI reports this month, showing surprisingly muted inflation despite the tariff-related uplift in certain import-heavy categories. It showed a 0.2% increase in May from the prior month and a 2.68% increase from a year ago, but Headline PCE remained at 2.3%, just a whisper away from the Fed's stated inflation objective of 2%. Core services prices, a closely watched metric by the Fed, only rose 0.1% after a flat reading in April. The same report also showed that U.S. Personal Spending declined in May by the most since the start of the year, with Personal Income falling by the most since 2021 on a pullback in government transfers. Both measures remained higher by 4.5% from a year ago in May, cooling from annual growth of over 5% in the prior month.
Rebound in consumer sentiment
U.S. Consumer Sentiment soared in June to a four-month high, with inflation expectations plummeting as consumers reported far less pronounced price increases than feared. The University of Michigan's sentiment index for June jumped to 60.7 from 52.2 the month before, marking the largest increase since the start of 2024. Consumers expect prices to rise 5% over the next year, a significant drop from the 6.6% expected increase in June, indicating the largest monthly improvement since 2001. Five-year inflation expectations also tumbled to 4.0% in June, easing from a three-decade high of 4.6% in the first reading in early May. The report showed that "broad-based improvement across numerous facets of the economy" was taking place with indexes tracking personal finances and business conditions surging by 20% or more. Despite the June rebound, however, the overall sentiment index remained at levels typically seen during recessions and far from the 100+ levels seen regularly in the three years before the 2020 pandemic.
Sluggish housing markets
Data for this week showed that U.S. housing markets remained stuck in neutral, repeating a trend that's been going on for much of the past three years since the start of the Fed's rate hiking cycle in early 2022. Existing Home Sales took a small step forward in May to a slow pace, while New Home Sales tumbled in May by over 13%, marking a seven-month low. Meanwhile, home price appreciation decelerated in April to the slowest pace since mid-2023, with the Case-Shiller National Home Price Index rising 2.7% from a year earlier, below the 3.4% annual increase in March. Among the 20 major cities, New York posted the biggest annual price gain at 7.9%, while prices increased 6% in Chicago and 5.5% in Detroit. Two metros posted annual declines, with prices dropping 2.2% in Tampa and.2% in Dallas.
Equity REIT & Homebuilder Week In Review
Best & Worst Performance This Week Across the REIT Sector
In the REIT arena, Data Center REITs were the top scorers on the leaderboard, but they were also the top losers earlier this year. In this week's competition, Equinix (EQIX), the largest data center REIT and fourth-largest weighting in the real estate benchmarks, took a big hit after it issued gloomy notions about its future performance at its analyst day event this week. It slashed its outlook for AFFO per share growth from 7% to 9% until 2029, and for dividend growth from about 8% to more than 8% during that same time. Analysts felt like the outlook implied increased capital intensity and "some pain in the early goings" as Equinix stepped into a (wow, that's a mouthful) "significant amount of change." Peer Digital Realty (DLR) suffered more modest declines of around 2%, while Iron Mountain (IRM) actually gained about 1%.
In the mall world, Simon Property Group (SPG) took a 2% victory lap after it announced the acquisition of Swire Properties' interest in the retail and parking at Brickell City Centre, a 5-million-square-foot mixed-use property located in Miami. Macerich (MAC) also got an applause from critics after it announced the acquisition of Crabtree Mall, a market-dominating, Class A retail center totaling approximately 1.3 million square feet in Raleigh, NC for $290 million. It projects an initial yield of approximately 11% based on the property's estimated 2024 net operating income and plans to invest about $60 million in new redevelopment and leasing capital to boost the center's performance.
REITs were active again this week in the capital-raising department, announcing a combined $2.6 billion in total fundraising activity following a similarly impressive haul in the previous two weeks. Senior Housing REIT Welltower (WELL) raised $1.25 billion in senior unsecured notes, and both Public Storage (PSA) and NNN REIT raised $875 million and $500 million respectively in senior unsecured notes, respectively. These funds will help REITs refinance their longer-term debt as they anxiously await a significant pullback in interest rates to do so.
Additional Headlines from The Daily REITBeat on iREIT+Hoya
- Other key industry developments include:
- Global Medical REIT appointing Mark Decker as its CEO
- Orion Properties confirming receipt of an unsolicited cash offer from Kawa Capital Management for all of its outstanding shares at $2.50/share
- Global Net Lease completing the final phase of its multi-tenant portfolio sale to RCG Ventures, generating approximately $313 million in gross proceeds
- Plymouth announcing the acquisition of a 1.95-million-square-foot industrial portfolio located across Columbus, Cincinnati, and Cleveland, OH for $193 million
- Gladstone Commercial acquiring a 215k SF industrial manufacturing and warehouse facility in Harrison Township, MI leased to Yanfeng International Automotive Technology
REIT Credit Ratings
- During the week, S&P upgraded the credit ratings of Global Net Lease and raised its issue-level rating on the senior unsecured notes to "BBB–" from "BB+." Fitch downgraded the credit ratings of Hudson Pacific, including its issuer rating to "B+" from "BB–" and downgraded its preferred stock rating to "B" from "B+" with a stable outlook.
2025 Performance & 2024 Recap
As we near the halfway point of 2025, real estate equities have posted mixed performance, giving up early-year outperformance over the past two months as benchmark interest rates rebounded to four-month highs. The Equity REIT Index is now up 1.4% on the year, while the Mortgage REIT Index has gained 2.3%, and the Housing 100 Index has shed 4.2%. It's interesting to note that while seven out of 18 property sectors are up year-to-date, data center REITs have been among the laggards with year-to-date declines of around 10%.
Looking back to 2024, the Equity REIT Index posted modest total returns of 4.8%, while the Mortgage REIT Index posted total returns of 1.6%, significantly lagging the 26.2% gain on the S&P 500. In 2024, 12 out of the 18 property sectors finished higher, led by data center, regional mall, healthcare, and office REITs, while "goods-oriented" sectors generally lagged, with timber, industrial, and cannabis REITs among the losers.
Economic Calendar In The Week Ahead
A star-studded lineup of employment data highlights the economic calendar in the holiday-shortened week ahead, with the BLS Nonfarm Payrolls as the main event on Thursday. Economists expect job growth of 129k for the month, with annual wage growth remaining at 3.9%. With this data set to drop, it'll be a busy week for investors as they parse through a plethora of business survey data, including readings on Manufacturing PMI and Service PMI, and a barrage of Fed Speak, with remarks from Fed Chair Powell taking center stage on Tuesday. U.S. equity and bond markets will be closed on Friday for the Independence Day holiday, and will close early on Thursday (1pm ET for equity markets and 2pm ET for bond markets).
*For an in-depth analysis of all real estate sectors, check out all of our quarterly reports: Apartments, Homebuilders, Manufactured Housing, Student Housing, Single-Family Rentals, Cell Towers, Casinos, Industrial, Data Center, Malls, Healthcare, Net Lease, Shopping Centers, Hotels, Billboards, Office, Farmland, Storage, Timber, Mortgage, and Cannabis.
Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed above, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings can be found on our website.
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- S&P 500's gains exceeded 4% this week, with the technology sector leading the party, while Real Estate equities lagged due to data center REITs and NYC-focused REITs after a left-leaning political victory.
- Personal income and spending declined in May, despite the improving consumer sentiment and lower inflation rates.
- In the housing market, existing home sales took a small step forward, but new home sales tumbled to a seven-month low, with home price appreciation decelerating.
- Data centers experienced gloomy outlooks amid increased capital intensity, while malls saw improvements with acquisitions and refinancing activities.
- Economists expect job growth of 129k for June, with annual wage growth remaining at 3.9%.
