REITs Rally On Wild Week As Interest Rates Dive

August 10, 2019 | Hoya Capital

REITs Rally On Wild Week As Interest Rates Dive Uncategorized Aug 10 Written By To read the full article, click here to view SeekingAlpha! Amid the volatile backdrop of trade wars and geopolitical uncertainty, the US housing market may be an unlikely stabilizing force. As goes the housing sector, so goes the economy. 2019 continues to be a year of rejuvenation for the single-family homebuilders after falling into a “mini-recession” in 2018.

Sharply lower mortgage rates have eased affordability concerns. Second-quarter earnings season may go down as the turning point for the largest US homebuilders. Order growth exceeded expectations, rising more than 6% from last year. While slower-reacting data sets remain soft, forward-looking metrics like mortgage demand, homebuilder sentiment, and commentary from homebuilders have painted a brighter picture for the second half of 2019. Long-term fundamentals continue to support healthy and growing demand for single-family homes in the 2020s and upward pressure on home values amid a growing housing shortage.

For the second straight week, the broad-based REIT ETFs ( VNQ and IYR ) rallied more than 1% as investors flocked to the domestic-focused and rate-sensitive equity sectors. The residential and technology REIT sectors were the standouts of a better-than-expected 2Q19 REIT earnings season that saw an impressive 50% of REITs raise full-year guidance expectations, well above the recent second-quarter averages. After giving up their year-to-date outperformance earlier this summer, REITs are again outperforming the S&P 500 by more than 6%.

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