Does the Real Estate Sector Have Hidden Growth Potential?

The Real Estate sector (IYR) has cleared an important price level at $88.76 or the high of 11/9/2020. The real estate recovery has been slow compared to the rest of the market, which is more like a roller coaster ride at this point. However, IYR has put in some decent consolidation from $80-87 area and, now that it has broken major multi-month highs, it looks clear to head even higher.

The real estate sector has taken an interesting shift when people began to leave highly populated areas or cities in search of more space and lower housing costs. Working from home gave people more freedom to move about without the confines of reporting to a physical office location. Furthermore, people soon desired upgrades or bigger houses as they found out that working from home can be a bit tough without some dedicated space. This led to increased property sales and created housing booms in specific areas.

With interest rates at historic lows, people could not help but take advantage of their extra buying power. Additionally, the Fed plans to keep rates low for at least the next 1-2 years, meaning this will continue to attract buyers that feel pressure from a time limit on low rates.

A rising housing market means homebuilders should also see an increase, right?

But if you look at the Homebuilders’ sector (XHB) it looks as though we are late to the party. XHB broke its highs around late July of 2020.

While IYR is lagging in price, it has a great amount of upward space to explore. Especially if IYR can hold over $89 as new support.

  • S&P 500 (SPY): 385 support
  • Russell 2000 (IWM): Support 218
  • Dow (DIA): 312 support area
  • Nasdaq (QQQ): 330 support.
  • KRE (Regional Banks): Needs to hold $60.00
  • SMH (Semiconductors): 246.79 resistance. Support 223.08
  • IYT (Transportation): Support 223 the 50-DMA 233 resistance
  • IBB (Biotechnology) 168 support area
  • XRT (Retail) 75.28 support, 80.43 resistance

Mish Schneider

Director of Trading Research and Education

Forrest Crist-Ruiz

Assistant Director of Trading Research and Education