XLRE: Did the Real Estate ETF Actually Build Wealth From 2016 to 2025?

If you ask most people what they think about real estate as an investment, you’ll probably hear something like this: “Real estate always goes up. It’s one of the safest ways to build wealth.”

For decades, this has basically been true. Home prices have skyrocketed. People who bought homes in 2016 have seen their property values go up and up.

However, there’s a big difference between owning real estate directly and owning the real estate sector through a stock market ETF.

So in this article, we will look at XLRE, the S&P 500 real estate sector ETF, from 2016 to 2025. We’ll take a look at its performance and compare it to inflation, the broad market, money supply, gold, and other sectors. The results might surprise you.

Nothing in this article is financial advice. I’m just laying out the data, voicing my opinion, and letting you draw your own conclusions.

What Is XLRE?

XLRE is the Real Estate Select Sector SPDR Fund. It was created by a company called State Street Global Advisors and launched in October 2015. It is one of eleven sector ETFs that basically chop the S&P 500 into its major industry groups so investors can target specific parts of the market.

Think of it like this. The S&P 500 is a pizza. XLRE is just the real estate slice.

When you buy XLRE, you are buying stock in real estate companies that are listed in the S&P 500. You are not buying actual properties. You are buying shares in the companies that own those properties.

The biggest companies inside XLRE are not what most people picture when they think of real estate. The top holdings include Prologis (which owns giant industrial warehouses and logistics facilities), American Tower (which owns cell towers), Equinix (which owns data centers), Crown Castle (more cell towers), and Public Storage (self-storage facilities).

So when you picture the houses in your neighborhood, that’s not really what XLRE is tracking. It is much more weighted toward commercial real estate like warehouses, data centers, and cell towers. That kind of real estate behaves very differently from the residential market.

What Is a REIT?

Before we go any further, we need to talk about REITs because XLRE is basically a basket of them.

REIT stands for Real Estate Investment Trust. A REIT is a company that owns income-producing real estate. These include: apartment complexes, office buildings, shopping malls, warehouses, hotels, hospitals, cell towers, and data centers.

What makes REITs unique is that they are required by law to pay out at least 90% of their taxable income to shareholders as dividends. Because of that, REITs tend to pay out higher dividends than most other types of stocks.

However, because they are paying out most of their income, they don’t have as much cash left over to reinvest and grow their business. A regular company can keep all their profits and decide what to do with them, a REIT is limited.

When you buy XLRE, you are essentially buying a little piece of a whole bunch of REITs all at once.

How REITs Actually Make Money

REITs make money the same way any landlord does. They own properties, they charge tenants rent, and the difference between what they collect and what they spend on operating costs and debt payments is their profit.

Some REITs also make money when property values go up and they sell a building for more than they paid for it. For most REITs, rental income is the engine that drives everything.

REITs vs. Owning a Home

When you own a home, one of the biggest advantages you have is leverage. Most people do not pay cash for a house. They put down 10% to 20% and borrow the rest.

So let’s say you put $60,000 down on a $300,000 house and the house goes up in value to $400,000. You just made $100,000 on a $60,000 investment. That works out to about a 167% return on your actual cash, even though the house itself only went up 33% in price. That is the power of leverage.

REIT investors do not get that kind of leverage. You are buying shares at market price with your own money.

Beyond that, your home also serves a dual purpose. It is an investment and a place to live at the same time. As you pay down your mortgage and your home’s value grows, you are building equity that a renter never gets to build.

There are also tax advantages to owning a home that REIT investors do not get. Things like mortgage interest deductions, and capital gains exclusions of up to $250,000 for single filers or $500,000 for married couples when you sell your primary residence.

Homeowners also do not watch the value of their home go up and down like a stock investor might. Homes aren’t priced in real time. There’s no stress from watching daily price fluctuations.

However, owning a home comes with its own headaches. It’s not a liquid investment (being able to sell depends on market conditions). Things break down and need maintenance over time. XLRE can be bought in a few seconds and doesn’t require any extra work.

REITs vs. Being a Landlord

If owning a home is one level of real estate involvement, being a landlord is a step further. You own a property specifically to rent it out and collect income from tenants.

As a landlord, you still get the leverage benefit we talked about above. And on top of that, you have direct control over your investment. You pick the tenants, set the rents, decide when to renovate, and make all the calls that directly affect your returns.

The downside is that being a landlord is actual work. Properties break. Tenants have problems. Vacancies happen. You have to manage all of it yourself (or pay someone else to manage it for you, which cuts into your profits).

XLRE, by comparison, is completely passive. You buy shares and that is it. No midnight calls about a broken water heater. But in exchange for that convenience, you give up the leverage, the control, and the tax benefits that direct ownership gives you.

The Benchmarks We Used

Before we get into the numbers, let’s go over what we are comparing XLRE to and why each benchmark matters.

CPI (Consumer Price Index)

CPI is the most commonly used measure of inflation. It tracks how much more expensive everyday goods and services are getting over time. From 2016 to 2025, CPI grew at 3.01% per year. Any investment that does not beat CPI is actually losing purchasing power in real terms, even if the dollar amount in your account is going up. For more on how inflation affects your everyday life, check out our article on wages vs. inflation.

M2 Money Supply

M2 measures the total amount of money circulating in the US economy. When M2 grows, each dollar you hold becomes worth a little less because there are more dollars competing for the same goods and assets. From 2016 to 2025, M2 grew at 5.41% per year. We use it as a benchmark because if your investment cannot beat M2 growth, you are not really building new wealth. You are just keeping up with money creation. For a full breakdown of what M2 is and why it matters, read our article on the M2 money supply.

SPY (The Broad Stock Market)

SPY is the most widely held S&P 500 index fund. It represents what an average investor who simply bought the entire US stock market got in return during this period. From 2016 to 2025, SPY had a CAGR of 14.71% per year.

Gold

Gold had a CAGR of 14.70% per year from 2016 to 2025. We include gold as a benchmark because it reflects what happens to the value of money when the money supply keeps expanding. Gold does not produce any earnings or pay any dividends. It simply holds its value against the declining purchasing power of the dollar.

XLRE From 2016 to 2025: The Data

Alright, let us get into the actual numbers.

XLRE had a compounded annual growth rate (CAGR) of 6.12% per year from January 2016 to December 2025 with dividends reinvested. In simple terms, that means if you had put $10,000 into XLRE at the start of 2016 and just let it sit there, you would have ended up with about $18,080 by the end of 2025.

Here is how that compares to the broad market and gold:

Asset	CAGR	$10,000 grown to
SPY	14.71%	$39,650
Gold	14.70%	$39,178
XLRE	6.12%	$18,080

SPY and gold both turned $10,000 into roughly $39,000 to $40,000 over 10 years. XLRE turned $10,000 into $18,080. That’s less than half of what SPY and gold returned over the same period.

And remember, this was during one of the most talked-about real estate booms in recent memory. That makes these numbers even more worth thinking about.

What the Data Shows

XLRE vs. Inflation

Let us start with the good news. XLRE did beat inflation over the 10-year period. At 6.12% per year versus CPI at 3.01%, XLRE outpaced inflation by about 3.11 percentage points annually. So in real terms, XLRE investors did grow their purchasing power. That is a legitimate positive and it is worth saying clearly.

XLRE vs. the M2 Money Supply

XLRE at 6.12% beat M2 money supply growth at 5.41%, with a 0.71 percentage point gap between them.

What does that mean for the regular person? It means that XLRE modestly outperformed the creation of new money.

XLRE vs. the Broad Stock Market

XLRE underperformed SPY by 8.59 percentage points per year. That is the biggest gap in this entire comparison and it is worth really sitting with that number.

From 2016 to 2025 the US stock market had a remarkable run, driven largely by technology companies, strong corporate earnings, and a decade of relatively cheap money. XLRE did not participate in any of that momentum. While the rest of the market was charging forward, the real estate sector ETF was quietly putting up modest numbers that barely cleared the money supply growth threshold.

In dollar terms, that 8.59 percentage point gap meant the difference between ending up with $39,650 and ending up with $18,080 from the same $10,000 starting investment. That is more than $21,000 left on the table by choosing real estate over the broad market.

XLRE vs. Gold

XLRE underperformed gold by 8.58 percentage points per year. And the dollar gap is pretty stunning when you put it plainly. Gold turned $10,000 into $39,178. XLRE turned $10,000 into $18,080.

Here is the part that really makes you think. Gold does not pay dividends. It does not produce anything. It does not contribute to the economy in any direct way. And it still more than doubled the dollar outcome of the real estate sector ETF during one of the biggest real estate booms in a generation.

Gold’s strong performance during this period is not really about gold becoming more valuable. It is about the dollar becoming less valuable. When the money supply grows at nearly 6% per year for a decade, the purchasing power of each dollar shrinks. Gold reflects that shrinkage. XLRE should theoretically have done the same thing since real assets like properties should also rise alongside inflation. But the data tells a different story.

Benchmark	CAGR	XLRE vs. Baseline
XLRE	6.12%	–
CPI	3.01%	+3.11%
M2	5.41%	+0.71%
SPY	14.71%	-8.59%
Gold	14.70%	-8.58%

The 2022 Problem: When Interest Rates Crushed REITs

To really understand XLRE’s performance over this whole period, you need to understand what happened in 2022. Because 2022 was brutal for REITs specifically.

That year, the Federal Reserve raised interest rates aggressively to fight inflation that had climbed to 10.38% annually, the worst level in about 40 years. As a direct result of those rate hikes, XLRE fell 26.25% in a single calendar year.

So why do rising interest rates hit REITs so hard? There are a few reasons.

First, REITs carry a lot of debt. They borrow money to buy properties and those loans need to be refinanced over time. When interest rates go up, refinancing gets more expensive, which squeezes their profit margins directly. Lower profit margins means lower payments to investors.

Second, rising rates make REIT dividends less appealing to investors. Think about it this way. If a REIT is paying you a 4% dividend but you can now get 5% from a safe government bond with basically no risk, why would you bother with the REIT?

Third, higher rates slow down real estate transactions across the board. When borrowing is expensive, fewer deals get done, property values come under pressure, and the whole ecosystem slows down.

Now here is the contrast that really stands out. Physical homeowners with fixed-rate mortgages barely felt 2022 at all. If you had locked in a 3% mortgage rate in 2020 or 2021, your monthly payment did not change one cent when rates went to 7%. Your home value might have plateaued or dipped a little, but you were not watching your investment fall 26% in a year the way XLRE investors were.

That gap between direct homeowners and XLRE investors in 2022 is one of the clearest illustrations of how different these two things really are. Same real estate boom. Very different outcomes depending on how you were invested.

How XLRE Compares to Other S&P 500 Sectors

We did a full breakdown of all nine original S&P 500 sector ETFs from 1999 to 2025 in our sector returns analysis. XLRE only launched in 2015, so it does not have that same length of history. Even so, it is worth seeing where it stacks up.

Here is how XLRE’s 6.12% CAGR from 2016 to 2025 compares to the other sectors over the full 1999 to 2025 period:

Sector	CAGR (2016 to 2025)
XLK	22.24%
XLI	14.86%
XLF	14.53%
XLY	14.49%
XLU	11.43%
XLB	10.85%
XLV	10.80%
XLE	9.34%
XLP	8.00%
XLRE	6.12%

XLRE had the lowest CAGR of any sector since its inception. Even defensive sectors such as utilities, consumer staples, and health care all outperformed real estate.

The Bottom Line

Real estate is one of those topics that hits people on an emotional level. Most of us grew up hearing that owning property is one of the safest and most reliable ways to build wealth. And for a lot of people who owned physical property during this period, that narrative held up.

XLRE tells a different story.

The real estate sector ETF returned 6.12% annually from 2016 to 2025 with dividends reinvested. It beat inflation, which is genuinely good. It modestly outperformed the creation of new money at 0.71 percentage points per year. However it significantly underperformed the broad market and gold, and it was the worst performing sector since its inception.

The gap between the homeowner who built real wealth and the XLRE investor who barely kept up with money printing comes down to a few key things: leverage, direct ownership, and the fundamental difference between owning a real physical asset and owning stock in a company that owns real physical assets.

I’m not saying to buy or avoid XLRE. This is not financial advice. I just want to show the data and voice my opinions and explanations. You can do whatever you want with this information.

Frequently Asked Questions

What is XLRE and when did it launch?

XLRE is the Real Estate Select Sector SPDR Fund. It was created by State Street Global Advisors and launched in October 2015. It tracks the performance of real estate companies inside the S&P 500, including REITs and real estate management and development companies.

What is a REIT in simple terms?

A REIT (Real Estate Investment Trust) is a company that owns income-producing real estate like apartment buildings, warehouses, data centers, and cell towers. By law, REITs have to pay out at least 90% of their taxable income to shareholders as dividends. This lets regular investors get exposure to real estate without having to directly own or manage any properties.

What was XLRE’s CAGR from 2016 to 2025?

XLRE had a compounded annual growth rate of 6.12% per year from January 2016 to December 2025 with dividends reinvested. A $10,000 investment at the start of that period would have grown to approximately $18,080 by the end.

Did XLRE beat inflation from 2016 to 2025?

Yes. XLRE beat CPI inflation of 3.01% per year by about 3.11 percentage points annually. So in real terms, XLRE investors did grow their purchasing power over the 10-year period. That is the positive side of the story.

Did XLRE beat M2 money supply growth from 2016 to 2025?

Yes. XLRE at 6.12% beat M2 money supply growth of 5.41% by 0.71 percentage points per year.

Why did XLRE underperform physical real estate during the same period?

XLRE owns stock in real estate companies rather than physical properties directly. Because of that, it does not benefit from the leverage that direct property ownership provides. It is also very sensitive to interest rate changes, which caused XLRE to fall 26.25% in 2022 when the Fed raised rates aggressively. Physical homeowners with fixed-rate mortgages did not experience anything close to that kind of drop.

How does XLRE compare to other S&P 500 sectors?

XLRE’s 6.12% CAGR from 2016 to 2025 places it at the bottom of the sector rankings. Every other sector produced a higher long-term CAGR.

Why did gold outperform XLRE during the biggest real estate boom in a generation?

Gold returned 14.70% annually from 2016 to 2025 compared to XLRE’s 6.12%. Gold’s strong performance during this period mainly reflects the declining purchasing power of the dollar as M2 money supply grew at nearly 6% per year. Gold does not produce earnings or pay dividends. It simply holds its value against a dollar that is being diluted over time. The fact that gold more than doubled XLRE’s return during a major real estate boom raises a real question about where the actual gains from that boom ended up flowing.