Real estate has made a lot of people rich. You’ve heard the stories. Someone bought a house in 2016, and by 2025, its value skyrocketed.
So you did the math. Real estate ETFs seemed like the easy way in. No tenants, no toilets, no mortgage. Just buy the ticker and ride the boom, right?
Here’s the problem. XLRE, the S&P 500’s real estate ETF, tells a very different story than the one you’ve heard.
I pulled the real numbers on XLRE from 2016 to 2025. I stacked it against inflation, the money supply, the S&P 500, and gold.
The results might surprise you.
XLRE was created on October 7, 2015. However, I use CPI and the M2 money supply as benchmarks. These two are updated monthly, so I decided to start my analysis in 2016 because it’s easier for me. If you do your own research and start on October 7, 2015, your numbers might be slightly different than mine.
Key Takeaways
- XLRE grew 6.12% a year from 2016 to 2025. A $10,000 investment turned into about $18,080.
- It beat inflation, but barely beat the money supply. M2 grew 5.96% a year, almost matching XLRE’s return.
- Stocks and gold more than doubled XLRE’s growth. SPY and gold both turned $10,000 into roughly $39,000.
- XLRE ranks last among all S&P 500 sectors, even utilities beat it.
- Owning a REIT ETF and owning a house aren’t the same bet. Leverage explains most of the gap
What is XLRE, the S&P 500’s Real Estate ETF?
XLRE is the Real Estate Select Sector SPDR Fund. State Street launched it in October 2015. It tracks real estate companies inside the S&P 500.
XLRE doesn’t own buildings. It owns stock in companies that own, run, and manage buildings.
XLRE’s biggest holdings include:
- Welltower: senior living and medical outpatient facilities
- Prologis: industrial warehouses and logistics
- American Tower: cell towers and communications infrastructure
- Equinix: data centers
- Simon Property Group: malls, retail, entertainment
Notice that none of these companies own houses.
Most people picture real estate as homes and apartment buildings. The largest real estate companies in the S&P 500 aren’t residential at all. They’re warehouses, cell towers, data centers, and commercial real estate. That’s a different market than most homeowners experience.
What is a REIT, and how is it different from a stock?
REIT stands for Real Estate Investment Trust. It’s a company that owns income-producing property. These include:
- offices
- malls
- warehouses
- hotels
- hospitals
- cell towers
Why REITs must pay out 90% of their income
By law, REITs must pay out at least 90% of their taxable income as dividends.
That single rule changes everything about how REITs behave.
Because they pay out so much income, REITs attract investors who want steady cash flow.
This same rule limits how much a REIT can reinvest in itself. A regular company can keep its profits and grow. A REIT mostly can’t.
XLRE is a basket of REITs and real estate companies from the S&P 500. Buy one share, and you own a small piece of all of them.
How do REITs actually make money?
REITs make most of their money one way: rent.
They own property and charge tenants to use it. Subtract operating costs, maintenance, and debt payments from what they collect, and what’s left is profit. Most of that profit goes straight back to shareholders as dividends.
Here’s a personal example. My mother in law used to live in a high end retirement community that would provide basic medical services. Her rent was almost $9,000 a month! Her monthly payments (along with all the other residents) are how retirement communities make their money.
Rental income versus property appreciation
REITs can also profit when their properties gain value. Say a REIT buys a warehouse for $10 million. Five years later, it sells that same warehouse for $15 million.
That $5 million gain flows back to shareholders too.
Appreciation is less common than collecting rent. Rental income drives most REIT profit.
How did XLRE perform from 2016 to 2025?
XLRE had a compounded annual growth rate (CAGR) of 6.12% per year from January 2016 to December 2025.
Here’s how XLRE performed compared to several benchmarks.
| Asset | CAGR (2016 – 2025) |
|---|---|
| XLRE | 6.12% |
| SPY | 14.71% |
| GLD | 14.70% |
| CPI | 3.01% |
| M2 | 5.41% |
XLRE significantly underperformed the S&P 500.
It barely outpaced the increase in the money supply (6.12% vs 5.41%).
How does XLRE compare to other S&P 500 sectors?
XLRE was the worst performing sector in the S&P 500 from 2016 to 2025.
Here’s the full comparison.
| ETF | CAGR (2016 – 2025) | $10,000 grew to… |
|---|---|---|
| XLK | 22.36% | $79,490 |
| XLI | 13.30% | $34,878 |
| XLF | 13.06% | $34,168 |
| XLY | 13.02% | $34,068 |
| XLU | 10.40% | $27,013 |
| XLB | 9.80% | $25,453 |
| XLV | 9.72% | $25,257 |
| XLE | 8.24% | $21,753 |
| XLP | 7.22% | $20,144 |
| XLRE | 6.12% | $18,172 |
Defensive sectors such as consumer staples (XLP) and utilities (XLU) had a larger CAGR than real estate.
Why did XLRE underperform during a real estate boom?
XLRE existed during one of the most talked-about real estate booms in modern American history.
Why was it the worst performing sector in the S&P 500?
The missing ingredient: leverage
A homeowner who buys a house with a mortgage controls the full value of that home while only putting down a fraction of the cash. If the home rises in value, the gains flow entirely to the owner, not the bank.
XLRE investors don’t get that. They own shares in companies, not leveraged property. That’s the core difference.
Why XLRE fell 26% in 2022
When the Fed raised rates aggressively in 2022, XLRE fell 26.25% that year alone.
The Federal Reserve raising interest rates is threatening to XLRE because they occupy the same space in a portfolio.
Remember XLRE is income and dividend based. When the Federal Reserve raised interest rates to around 5.5%, that’s the risk-free rate.
If you’re an income investor, what’s the better deal? A risk-free 5.5% interest rate or XLRE that has a lower dividend yield AND has companies that are struggling from high inflation?
Who did the real estate boom actually benefit?
Homeowners who were able to purchase their homes at a lower price, with a lower fixed rate mortgage (or those who refinanced) benefitted the most.
They were able to see their house appreciate in value, and potentially lock in a mortgage rate lower than inflation.
It’s important to remember this:
Direct homeownership and real estate stock ownership aren’t the same.
A homeowner with a fixed mortgage has leverage, forced savings, and shelter from rate hikes. An XLRE investor got none of that.
The real estate story you’ve heard was true. It just wasn’t XLRE’s story.
Frequently Asked Questions
Does XLRE pay monthly dividends?
No. XLRE distributes its dividends quarterly.
What is XLRE’s expense ratio?
As of August 2026, XLRE’s expense ratio is .08%.
What is XLRE’s dividend yield?
As of August 2026, XLRE’s dividend yield is 3.15%