After years of underperformance and with prices stuck at levels not seen since the global financial crisis, the real estate sector is flashing signals of extreme weakness.
The numbers are brutal. The Vanguard Real Estate ETF (NYSE:VNQ), a bellwether for U.S. real estate stocks, has underperformed the SPDR S&P 500 ETF Trust (NYSE:SPY) by 5% so far in 2025.
That marks the ninth time in the past 10 years that the sector has lagged the broader market.
Compared to its 2007 highs relative to the S&P 500, real estate has lost about 75% of its value in relative terms.
That’s a wipeout worse than the 2008 housing crisis, and yet, the sector remains largely unloved by investors.
Are Real Estate Stocks Cheap Now?
Surprisingly, no. Despite the steep underperformance, real estate stocks aren’t trading at bargain-bin prices.
As of July 16, the trailing price-to-earnings (P/E) ratio for the S&P 500 real estate sector stood at 35.04—second only to tech, which trades at 35.48.
Even more telling, the forward P/E ratio stands …