NEW YORK, Dec. 28, 2025, 1:29 p.m. ET, Market closed
U.S. real estate stocks—especially publicly traded real estate investment trusts (REITs)—are entering the last three trading days of 2025 in an unusual spot: the broader market is hovering near record territory, yet real estate has been the notable laggard heading into year-end.
With Wall Street closed for the weekend and set to reopen Monday morning, investors are using the pause to re-check the same three levers that have dominated real estate equities all year: interest rates, the direction of the economy, and the widening performance gap between “AI-adjacent” winners and rate-sensitive sectors like REITs. [1]
Why real estate stocks lagged even as the S&P 500 climbed
Friday’s post-Christmas session was quiet and thinly traded, with the S&P 500 finishing essentially flat and ending the week near all-time highs. In that low-volume backdrop, strategists continued to frame the late-December move as part of the “Santa Claus rally” window, while emphasizing that light liquidity can make late-year sector rotations look more dramatic than they are. [2]
The big picture for real estate investors, though, is hard to miss: among the 11 S&P 500 sectors, real estate “seems to be the only sector that will have lost ground in 2025,” according to Reuters’ year-end sector snapshot. That underperformance matters because it sets up the core debate for the first quarter of 2026: is the sector cheap for a reason, or simply late to the party as the rate environment improves? [3]
The week’s two market-moving catalysts for REITs
1) Fed minutes on Tuesday: a “rates sensitivity” stress test for REIT valuations
Markets now have a clear calendar catalyst: the Federal Reserve’s minutes from the December 9–10 meeting are scheduled for release at 2:00 p.m. ET on Tuesday, Dec. 30. [4]
That matters for REITs because the sector’s valuation math is unusually exposed to the path of interest rates—via Treasury yields, borrowing costs, cap rates, and dividend discount models.
- In December, the Fed lowered the target range for the federal funds rate by a quarter point to 3.50%–3.75%, and the decision drew dissents—evidence the committee is not marching in lockstep into 2026. [5]
- Reuters reported the Fed lowered its benchmark rate by 75 basis points over its last three meetings of 2025, and that investors remain intensely focused on what comes next. [6]
In Reuters’ week-ahead preview, Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management, summed up the broader tape this way: “Momentum is certainly on the side of the bulls.” For real estate stocks, the question is whether that momentum spreads beyond tech into rate-sensitive laggards. [7]
Michael Reynolds, vice president of investment strategy at Glenmede, told Reuters the minutes may be “illuminating” because “handicapping how many rate cuts we’re going to get next year is a big thing markets are focused on right now.” For REIT investors, that translates into a direct sensitivity test: even small changes in the market’s rate-cut expectations can move dividend-heavy sectors quickly. [8]
2) Housing data (and affordability): a check on the consumer side of real estate
The other near-term driver is the housing calendar—particularly because residential REITs and housing-linked names can react to affordability signals.
Investopedia’s week-ahead schedule highlights:
- Pending home sales (November) on Monday, Dec. 29
- S&P Case-Shiller Home Price Index (October) on Tuesday, Dec. 30
- Initial jobless claims on Wednesday, Dec. 31 [9]
Investopedia notes that pending home sales will give a read on future transaction volume “in a housing market struggling with affordability,” while the Case-Shiller data arrives as home-price growth shows signs of slowing. That combination matters for real estate stocks because it influences everything from apartment demand to single-family rental turnover to consumer spending around moving, furnishing, and remodeling. [10]
The interest-rate link investors can’t ignore: mortgage rates and financing costs
Mortgage rates remain a central storyline—not just for homebuilders and housing activity, but also for market sentiment around the Fed and long-term yields.
Freddie Mac’s latest Primary Mortgage Market Survey showed the 30-year fixed-rate mortgage averaged 6.18% as of Dec. 24, down slightly from the prior week. [11]
For listed REITs, the “rates” impact is often more immediate through debt markets than mortgages. Still, the direction of mortgage rates is one of the most widely followed barometers for whether easing financial conditions are truly reaching the real economy—an important narrative catalyst if investors are considering rotating into beaten-down real estate equities.
Analyst and bank calls: where the Street is shifting its REIT playbook
While broad sector calls move with rates, stock-specific moves are increasingly driven by relative value, balance sheet resilience, and the ability to grow cash flows without relying on cheap debt.
JPMorgan’s REIT reshuffle and the Realty Income downgrade
JPMorgan downgraded Realty Income (O) to Underweight from Neutral, keeping a $61 price target, in a wider set of REIT rating changes tied to its 2026 outlook, according to TheFly. [12]
In an Investing.com summary of JPMorgan’s view, the bank said its bias remains toward “visible external growth,” pointing to companies with sizeable development and redevelopment pipelines, and highlighted Federal Realty’s strategy of recycling capital into “dominant shopping center assets” in higher income and growth markets. [13]
The same report listed several downgrades across property types—an example of how “real estate stocks” are no longer trading as one big macro bucket, even when rates dominate the headlines. [14]
Office remains the sector investors want to see “proof” from
Office exposure continues to be one of the most scrutinized corners of public real estate. In a separate Street-research note, Goldman Sachs analyst Caitlin Burrows lowered the firm’s price target on SL Green (SLG) to $42 from $48, reiterating a Sell rating, following the company’s 2025 investor day, according to TheFly. [15]
The takeaway for REIT investors going into Monday isn’t simply “avoid offices.” It’s that the market is still demanding tangible evidence—leasing traction, refinancing progress, asset sales at acceptable prices—before it rewards the group with higher multiples.
“Real estate stocks” aren’t one theme anymore: the property-type divergence is widening
One reason broad real estate ETFs can feel sluggish is that the sector has split into multiple narratives:
- Digital infrastructure (data centers, towers) is tied to AI, cloud, and power availability. Reuters reported that global data-center dealmaking surged to a record high through November, driven by demand for computing infrastructure amid the AI boom. [16]
- That thematic demand is feeding on-the-ground development: Transwestern announced an investment/partnership with FrontierGen to accelerate AI-focused data center campus projects in South Texas—an example of how the “AI buildout” is colliding with land, power, and real estate execution. [17]
- Net lease and retail REITs (often viewed as bond proxies) can benefit if long-term yields fall, but may lag when investors prefer higher-growth stories.
- Residential REITs can respond to affordability and job-market signals, especially as supply and demand conditions shift city by city. [18]
- Healthcare/senior housing has its own demographic and operating-cycle story, often less correlated to the office debate.
For investors, that means “real estate stocks” in 2026 may behave more like a collection of distinct subsectors than a single interest-rate trade.
What investors should know before Monday’s open
With markets closed today and reopening Monday (core U.S. session: 9:30 a.m. to 4:00 p.m. ET), here’s the practical checklist most likely to matter for real estate stocks in the next session and the final days of 2025. [19]
1) Watch rates—especially into Tuesday’s Fed minutes
The Fed minutes (Dec. 30, 2:00 p.m. ET) are the headline macro catalyst for REITs this week, and year-end positioning could amplify moves in rate-sensitive sectors. [20]
2) Track housing indicators for residential sentiment
Pending home sales (Monday) and Case-Shiller (Tuesday) can shift the tone on affordability, demand, and pricing—inputs that matter not only for housing-linked equities, but also for broader “soft landing vs. slowdown” expectations. [21]
3) Expect year-end liquidity effects
Reuters highlighted that light trading volumes can exaggerate asset-price moves around year-end, and Friday’s session showed below-average volume. That’s important context when assessing whether Monday’s sector swings reflect real conviction or thin-market mechanics. [22]
4) Know the holiday-week market schedule
Investopedia reported bond markets are set to close early at 2 p.m. ET on Wednesday, Dec. 31, while stock markets keep a normal schedule that day—and markets are closed on New Year’s Day (Thursday). For real estate stocks, bond-market liquidity can matter because REIT pricing often tracks rates closely. [23]
5) Focus on balance sheets and refinancing narratives—not just dividend yield
In a higher-for-longer world (even after cuts), REITs with near-term maturities, heavier floating-rate exposure, or large funding needs can trade very differently from peers. JPMorgan’s “relative value” reshuffle underscores how selective investors have become within the space. [24]
Bottom line for real estate stocks into the next session
As markets reopen Monday for the final three trading days of 2025, real estate stocks are sitting at the crossroads of two powerful forces: a broad equity market still near record highs, and a sector-specific story that hinges on whether rate-cut expectations, easing financing pressure, and improving fundamentals can finally translate into sustained outperformance.
The near-term roadmap is clear—housing data Monday, Fed minutes Tuesday, jobless claims Wednesday—while year-end flows may set the tone for how aggressively investors want to rotate into (or stay away from) 2026’s most debated income sector. [25]
References
1. www.fidelity.com, 2. www.reuters.com, 3. www.reuters.com, 4. www.federalreserve.gov, 5. www.federalreserve.gov, 6. www.reuters.com, 7. www.reuters.com, 8. www.reuters.com, 9. www.investopedia.com, 10. www.investopedia.com, 11. www.freddiemac.com, 12. www.tipranks.com, 13. www.investing.com, 14. www.investing.com, 15. www.tipranks.com, 16. www.reuters.com, 17. www.mrt.com, 18. www.investopedia.com, 19. www.nyse.com, 20. www.federalreserve.gov, 21. www.investopedia.com, 22. www.reuters.com, 23. www.investopedia.com, 24. www.investing.com, 25. www.investopedia.com
