Benzinga·2025-12-23 17:52Core Viewpoint - The stock market is expected to see a resurgence in real estate stocks and funds due to a decrease in the Consumer Price Index to 2.7%, which is below the consensus forecast of 3.0% or higher, leading to lower interest rate expectations and boosting rate-sensitive sectors like real estate [1][2]. Real Estate Market Outlook - The prolonged government shutdown is distorting economic data, but the market is reacting positively with hopes for lower interest rates, enhancing the appeal of real estate equities and REITs as yield-oriented investments heading into 2026 [2]. - The U.S. real estate market is currently stable but slightly below average in buyer activity, primarily due to affordability issues and a lack of desirable housing options [3]. - Homebuilding stocks are expected to perform well in 2026, driven by lower inflation and potential economic stimulants such as tax cuts [3]. Key Real Estate Stocks - Rocket Companies (NYSE:RKT): - Year-to-date performance is 65.4%, with a current trading price of $18.90 per share and an average 12-month price target of $22 to $25, indicating an implied upside of 11% [5][7]. - The company is expected to benefit from lower mortgage rates and its acquisitions, positioning it favorably in the housing market for 2026 [6][7]. - Prologis Inc. (NYSE:PLD): - Year-to-date performance is 20.8%, trading at $127 per share with an average 12-month price target of $130 to $132, reflecting a 4% implied upside [8][9]. - The company is well-positioned to benefit from increased demand in logistics and industrial properties, particularly due to e-commerce growth and lower borrowing costs [8][9]. - Digital Realty Trust (NYSE:DLR): - Year-to-date performance is -16%, currently trading at $148 per share with an average 12-month price target of $197 to $199, indicating a 30% upside [10][11]. - The company is expected to see significant revenue and profit growth driven by digital transformation and AI workloads, with a projected 11% revenue CAGR and 12% EBITDA CAGR from 2026 to 2029 [11]. Investment Trends - Investors are advised to be cautious, particularly avoiding traditional enclosed shopping malls and highly leveraged development REITs, as these sectors face structural challenges and risks in a higher-rate environment [12][13]. - There is a unique opportunity for investors to capitalize on quality real estate opportunities amid market transitions, with stronger fundamentals than suggested by headlines [14].