US Real Estate Stocks Hit All-Time Low Relative To S&P 500, Prompting Peter Schiff’s ‘Industry Is Dead’ Warning

• Charlie Bilello said U.S. real estate stocks have fallen to their lowest level ever compared with the S&P 500. 
• Peter Schiff warned that the sector could fall further as higher mortgage rates hurt the industry. 
• Higher interest rates have hurt real estate by raising borrowing costs, weakening housing demand and pressuring commercial properties. 

US real estate stocks have sunk to their weakest level ever relative to the S&P 500, wiping out all the outperformance they built during the early-to-mid 2000s housing bubble, according to Creative Planning's Charlie Bilello. Economist Peter Schiff warns the slide is far from over and calls the industry dead. 

The milestone matters because it suggests investors may be seeing a long-term shift rather than a temporary slowdown. The 10-year Treasury yield is near its highest level in 25 years, while mortgage rates are nearing 8%, reversing the low-rate support that helped the housing market for years. 

Real Estate Stocks Hit Record Low 

Bilello, Chief Market Strategist at Creative Planning, flagged the extreme in a post on X.

“US real estate stocks are now at their lowest level ever relative to the S&P 500, erasing all of their relative outperformance from the early-to-mid 2000s housing bubble.” 

The chart shows that the iShares US Real Estate ETF (IYR) to SPDR S&P 500 ETF Trust (SPY) ratio fell to a record low of 0.122 on Oct. 5. It had reached 0.525 in February 2007 during the housing boom before the Great Financial Crisis. Since then, real estate stocks have generally lagged the broader market despite occasional rallies. 

Schiff, an economist and longtime market bear, replied bluntly: "Plus they are going a lot lower from here. The industry is dead. It lived by ever falling mortgage rates and government subsidies. It's now dying by reversal of the same dynamics." 

Housing Affordability Crisis Hits Real Estate 

Schiff’s comments highlight a major change in interest rates and Federal Reserve policy. After the 2008 financial crisis, low borrowing costs helped boost REIT values, real estate deals and homebuilder profits. Now, higher 10-year Treasury yields have raised borrowing costs and made REIT dividends less attractive to investors. 

High mortgage rates are hurting housing demand and home sales, while commercial real estate faces lower property values and refinancing pressure. Investors are also moving money into safer Treasuries and technology stocks, cutting demand for real estate.

Last week, Morgan Stanley put out a mixed outlook on major U.S. homebuilders. The firm is bullish on Toll Brothers (TOL), giving it an ‘Overweight’ rating and $159 price target, citing wealthy buyers, pricing power and attractive valuation. PulteGroup (PHG) and D.R. Horton (DHI) received ‘Equal Weight’ ratings, with $128 and $151 price targets, respectively, as affordability concerns limit their upside. Lennar (LEN) received an ‘Underweight’ rating and a $65 price target due to incentives, higher lot costs, and weak first-time buyer demand. 

So far this year, DHI, PHM, and LEN stocks are down 2% to 27%, while TOL is up 0.1%.

Also see: ‘The Big Short’ Investor Michael Burry Justifies Lululemon Tax-Loss Sale: ‘I Am Not Throwing In The Towel’

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