Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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Summary

  • U.S. equity markets finished mostly higher Friday, concluding a strong week of performance in the first week of 2021 despite ongoing parison tensions in D.C. and disappointing employment data.

  • Ending the week with gains of 2.0%, the S&P 500 finished higher by 0.6% today while the Dow Jones Industrial Average gained 57 points and the Nasdaq 100 jumped 1.3%.

  • Real estate equities concluded a disappointing week on the upside as the broad-based Equity REIT ETF (VNQ) gained 1.0% with 13 of 19 property sectors in positive territory.

  • The Bureau of Labor Statistics reported that the U.S. economy lost 140k jobs in December - the first month of job declines since April - as the employment rebound reversed amid the "third wave" of economic shutdowns.

  • Rising prospectus for additional stimulus in the wake of the Georgia Senate elections has brought inflation fears back to the headlines. We'll break-down what it means for REITs and publish a full analysis of this week's economic data in our Real Estate Weekly Outlook report published on Saturday morning.

Real Estate Daily Recap

U.S. equity markets finished mostly higher Friday, concluding a strong week of performance in the first week of 2021 despite ongoing parison tensions in D.C. and jobs data showing a reversal in the employment recovery. Ending the week with gains of 2.0%, the S&P 500 ETF (SPY) finished higher by 0.6% today while the Dow Jones Industrial Average (DIA) gained 57 points and the Nasdaq 100 (QQQ) jumped 1.3%. Real estate equities concluded a disappointing week on the upside as the broad-based Equity REIT ETF (VNQ) gained 1.0% with 13 of 19 property sectors in positive territory. Mortgage REITs (REM) gained 0.4% today but ended the week off by 0.6%.

Rising prospectus for additional stimulus in the wake of the Georgia Senate elections was the theme throughout the week as rising inflation expectations lifted the 10-Year Treasury Yield higher by another 3 basis points on the day - and 19 basis points on the week - to fresh post-pandemic highs. Bitcoin (BTC-USD) was relatively steady today, holding near record-highs of nearly $40,000. Seven of the eleven GICS equity sectors finished higher on the day, led by the Consumer Discretionary (XLY), Utilities (XLU), and Technology (XLK) sectors. Homebuilders pulled back today, dragging on the Hoya Capital Housing Index despite fresh data from Redfin (RDFN) showing that the housing market momentum has continued into early 2021.

The Bureau of Labor Statistics reported that the U.S. economy lost 140k jobs in December - the first month of job declines since April - as the employment rebound reversed amid the "third wave" of economic shutdowns. Economists had expected gains of 70k. Revisions to the prior two months, however, added 135k. The "headline" unemployment rate stayed steady at 6.7% while the broader U6 underemployment rate dicked lower to 11.7%. The lukewarm nonfarm payrolls report followed encouraging jobless claims data earlier in the week as Initial Claims ticked lower to 787k, the lowest level in five-week.

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The REIT Forum is now the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.

Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

  • Alex Pettee, CFA
  • Earlier this year, we published a report titled "Cheap REITs Stay Cheap" that analyzed the "factors" that exhibited persistent outperformance in the REIT sector over the past several decades.

  • Key takeaways from this report included the observation that higher-yielding, higher-leveraged, and "inexpensive" REITs tended to produce inferior total returns over most measurement periods.

  • These "factors" were on full display at extreme levels in 2020 amid the coronavirus pandemic. We revisit and analyze the performance trends within the REIT sector.

  • REITs in the highest quadrant of dividend yields entering 2020 plunged more than 30% and saw the vast majority of dividend cuts. REITs in the lowest dividend yield quadrant produced positive total returns.

  • Despite the pullback in 2020, REITs have been one of the best-performing asset classes since the start of 2010. Investors willing to "pay up" for quality REITs should continue to be rewarded while "yield chasers" will likely be punished.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

Summary

  • U.S. equity markets finished broadly-higher Thursday as the partisan tensions eased and as investors begin to price-in the anticipated effects of the "trifecta" of political control for Democrats for economic policy.

  • Now higher by 1.6% for the week, the S&P 500 finished higher by 1.5% today while the Dow Jones Industrial Average gained 212-points. Small- and Mid-Caps added to their robust weekly gains.

  • Real estate equities have gotten off to a slow start in 2020, underperforming for the fourth-straight day as the Equity REIT ETF declined by 0.2% with 10-of-19 property sectors in negative-territory.

  • With additional stimulus high on the docket for the incoming administration, all eyes are on inflation expectations, the Fed, and Treasury Yields. Meanwhile, Bitcoin surged another 19.3% to fresh highs at nearly $40,000.

  • We heard business updates from a handful of net lease REITs over the last 24 hours including GNL, EPR, and AFIN. While rent collection has almost fully "normalized" for most REITs, movie theater owner EPR collected less than 50% of rent in Q4.

Real Estate Daily Recap

U.S. equity markets finished broadly higher Thursday as the partisan tensions eased and as investors begin to price-in the anticipated effects of the "trifecta" of political control for Democrats for fiscal policy. Now higher by 1.6% for the week, the S&P 500 ETF (SPY) finished higher by 1.5% today while the Dow Jones Industrial Average (DIA) gained 212 points. Real estate equities have gotten off to a slow start in 2020, underperforming for the fourth-straight day as the broad-based Equity REIT ETF (VNQ) declined by 0.2% with 10 of 19 property sectors in negative territory. The Mortgage REIT ETF (REM) gained 0.1% today but remains lower by 0.7% on the week.

With additional stimulus likely high on the political docket for the incoming Biden administration, all eyes are on inflation expectations, the Fed, and the 10-Year Treasury Yield, which again climbed to fresh post-pandemic highs at 1.07%. Bitcoin (BTC-USD) surged another 19.3% to fresh highs at nearly $40,000. Nine of the eleven GICS equity sectors finished higher on the day, led by the Technology (XLK), Consumer Discretionary (XLY), and Energy (XLE) sectors. Homebuilders led the Hoya Capital Housing Index to solid gains as well as the 30-Year fixed-rate mortgage dipped to fresh historic lows, laying the groundwork for a strong start to 2021 for the U.S. housing markets.

Today's gains were also aided by encouraging employment data as Initial Jobless Claims ticked lower to 787k to five-week lows, showing signs of improvement after an uptick in December corresponding with the "third wave" of economic lockdowns in several cities. Continuing Claims decreased to 5.07 million, down another 100k from last week. Since the peak in early May at nearly 25 million, Continuing Claims have retreated by 19.7 million. As discussed last week, the newly-signed stimulus package will provide an additional $300 per week in enhanced unemployment benefits, in addition to direct payments of $600 to most Americans and will provide additional funds for the Paycheck Protection Program extension. Economists are looking for employment gains to slow to roughly 100k in tomorrow's non-farm payrolls report following and for the unemployment rate to tick up slightly to 6.8%.

To Continue Reading, Click Here To Visit Seeking Alpha!


Join our Mailing List on our Website

The REIT Forum is now the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.

Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and other important disclosures and definitions are available by clicking the links below.

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