The iShares US Real Estate ETF (IYR) has fallen to its weakest level ever relative to the SPDR S&P 500 ETF (SPY), with the ratio between the two funds dropping to 0.122. That wipes out the entire relative lead that property shares had built before 2007 — a peak of roughly 0.46 in February 2007 — and marks a 73% decline from that high. The move is about relative performance, not a crash in home prices. It shows broad US equities have left real estate far behind over nearly two decades.
What's driving the gap
Two forces are doing most of the work. First, the Federal Reserve has gone back to raising interest rates, which pushes up borrowing costs for real estate investment trusts and makes their dividend payouts look less appealing next to bonds. Second, the 10-year Treasury yield is now above 5%, so investors can earn solid income without taking on property risk. Freddie Mac's weekly survey put the average 30-year fixed mortgage rate at 7.28% on October 1 — the highest since November 2023. Those numbers raise the cost of financing everything from office buildings to apartment complexes.
The Schiff call: 'dead'
Peter Schiff, chief economist at Euro Pacific Asset Management, didn't mince words. He said the real estate sector has much further to fall and called the industry 'dead'. His argument rests on reversing tailwinds: falling mortgage rates and government subsidies that once propped up the market are now fading or gone. Schiff's view is one opinion, but it captures a growing unease among investors who remember when property was a reliable store of value.
Household wealth shifts to stocks
The relative decline shows up in household balance sheets, too. Stocks now account for a record share of US household wealth, while the home equity share has slipped. That's a slow-moving change, but it reinforces the same story: for nearly twenty years, public equities have been the better bet. The ratio's record low is a stark marker of that shift.
Bilello flags the record
Charlie Bilello, chief market strategist at Creative Planning, flagged the record low ratio on X. His post brought attention to a number that had been grinding lower for months. The 0.122 reading is the weakest ever for US real estate stocks relative to the S&P 500, and it comes as the Fed's rate hikes continue to reshape the investment landscape.
What to watch
The next Freddie Mac mortgage rate survey lands Thursday. If the 30-year fixed rate pushes past 7.28%, it could add more pressure on REITs and further test the IYR/SPY ratio. Traders will also be watching the 10-year Treasury yield — any sustained move above 5% keeps the income alternative attractive. For now, the gap between US stocks and real estate is the widest it's ever been, and there's no clear trigger for a reversal.
