New York City – U.S. equity markets achieved new record highs this week, accompanied by a decrease in benchmark interest rates from their three-month peak. This movement followed the release of positive PCE inflation data and strong corporate earnings reports. Investors were relieved as the PCE Price Index data did not prompt concerns for the Federal Reserve, unlike the lukewarm CPI and PPI reports earlier in the month. Core PCE, excluding housing inflation, showed an annual increase of only 1.5% in January, below the Fed’s 2% inflation target.

The S&P 500 saw its 16th weekly gain out of the last 18, with a rise of 1.0%. Market caps across the board experienced gains, with the Mid-Cap 400 increasing by 1.9% and the Small-Cap 600 rising by 1.2%. The Nasdaq 100 continued its strong performance with a 2% increase. Real estate equities were among the top performers, following a positive earnings season for REITs. The Equity REIT Index was up 2.1% for the week, with 15 out of 18 property sectors showing positive growth. Additionally, the Mortgage REIT Index gained 1.9%. Homebuilders also saw gains of over 3% as housing inventory levels remained near historic lows despite sluggish sales.

Interest rates, which had reached three-month highs in mid-February, took a downward turn for the second consecutive week, despite an increase in commodity prices. The 10-Year Treasury Yield dropped by 8 basis points to 4.18%, down from recent highs of 4.33%. The 2-Year Treasury Yield also fell to 4.53% from recent highs of 4.74%. Although WTI Crude Oil prices reached four-month highs, rates continued to decline. Market expectations now suggest approximately 3.3 rate cuts this year, aligning with the Fed’s “dot plot” midpoint.

In housing market data, new home sales showed a modest increase in January, with supply growth of newly-completed homes remaining low. Despite slower sales trends, homes were being sold at a faster pace, indicating strong demand. The median sales price of homes decreased to $420k in January, down around 2% from the previous year.

Overall, the results from various sectors of real estate, including REITs, homebuilders, and mortgage REITs, displayed strong performance, with positive earnings reports seen across the board. The sectors that excelled included tech-focused and cannabis REITs, as well as hotel and specialty REITs.

Looking ahead, employment data is set to be a key focus in the coming week, with reports such as JOLTS, ADP Payrolls, Jobless Claims, and BLS Nonfarm Payrolls to provide valuable insights into the labor market. Economists are anticipating job growth of about 190k in February, following a robust report in January. Additionally, wage growth metrics will be closely monitored for signs of inflationary pressure.

As real estate sectors continue to navigate market fluctuations and economic indicators, investors remain vigilant for opportunities in various segments of the industry.