IYR ETF

To begin with, we are not major fans of ETFs of REITs, since REITs themselves are already asset portfolios and more layering is unnecessary and costly at 0.4% expense ratio. IYR is underperforming because of high costs of capital, and we think high or even higher costs of capital are the status quo for the foreseeable future. An adverse economic scenario could bring down costs of capital, which would be a net positive only for some of the REITs in IYR, with others being exposed on demand-side.

The commercial real estate market continues to experience volatility as US office values are 25% below their 2022 peak. However, SteelWave Co-Founder, Chairman and CEO Barry DiRaimondo believes this bear market could be a great investment opportunity.

The article assesses the iShares U.S. Real Estate ETF as a potential investment at its current market value. IYR has shown a slight return relative to the overall market over the last five months, and I anticipate that trend will continue. I believe the retail and office space sectors in Real Estate appear particularly at risk in the future.

iShares U.S. Real Estate ETF has mixed factors impacting its outlook, including macroeconomic factors and its current composition of holdings. IYR has the highest expense ratio and lowest dividend yield compared to other top real estate ETFs. The expected reduction of interest rates will benefit REIT funds, but IYR's heavy weight on overvalued holdings and low weight on favorably valued holdings may hinder its performance.

RXR Realty CEO Scott Rechler joins 'Squawk on the Street' to discuss why Rechler's been so outspoken about troubles in the commercial real estate sector, if it's too early to put capital to work in real estate, and more.

Valuation is important for both growth and value investors, and can impact returns and risk. Buying REITs when they are cheap relative to the S&P 500 has historically resulted in outperformance. REITs are currently cheaper than the S&P 500, making them a potentially better value investment.

This article evaluates the iShares U.S. Real Estate ETF as an investment option at its current market price. I have generally had a cautious or neutral stance on these types of funds in the past and that remains true to this day. The Real Estate sector has seen a boost recently, but I am concerned those gains will cool in the year ahead if economic growth cools.

iShares U.S. Real Estate ETF (IYR) offers exposure to REITs at a historically cheap valuation while still in a bear market. REITs have not participated in the recent market rally, indicating a different outlook on the economy compared to other sectors. Lack of dividend growth is concerning and investors should only allocate a small percentage of their total portfolio into IYR and REITs in general.

BTIG's Jonathan Krinsky joins 'Closing Bell' to discuss investor sentiment in REITs, apartment REITs improving as the rental market grows, and investment strategies for a bifurcated real estate market.