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  • Alex Pettee, CFA

Bidding Wars • Fresh Records • Home Values Jump

Summary

  • U.S. equity markets remained near record-highs Tuesday in a relatively subdued trading session as investors monitor COVID issues abroad while awaiting a busy slate of employment data later this week.

  • Following gains of 0.2% yesterday and closing at fresh record-highs, the S&P 500 eked-out a 0.1% gain, but the Mid-Cap 400 declined by 0.1% and the Small-Cap 600 fell 0.3%.

  • Real estate equities were mixed today as the Equity REIT Index finished lower by 0.3% with 13 of 19 property sectors in negative territory while Mortgage REITs declined 1.0%.

  • Ongoing concerns over COVID issues in Europe and Australia kept the 10-Year Treasury Yield below 1.50% today despite better-than-expected Consumer Confidence data and home price data showing continued upward pressure on home values amid a historic housing shortage.

  • A record 54% of homes were sold above their listing price over the past month. Nearly half of listed homes received an offer within one week while the average home sold was on the market for just 15 days.

Real Estate Daily Recap

U.S. equity markets remained near record-highs Tuesday in a relatively subdued trading session as investors monitor COVID issues abroad while awaiting a busy slate of employment data later this week. Following gains of 0.2% yesterday and closing at fresh record-highs, the S&P 500 eked out a 0.1% gain today, but the Mid-Cap 400 declined by 0.1% and the Small-Cap 600 fell 0.3%. Real estate equities were mixed today as the Equity REIT Index finished lower by 0.3% with 13 of 19 property sectors in negative territory while the Mortgage REIT Index finished off by 1.0%.

Ongoing concerns over COVID issues in Europe and Australia kept the 10-Year Treasury Yield below 1.50% today despite better-than-expected Consumer Confidence data and home price data showing continued upward pressure on home values amid a historic housing shortage. Despite the gains on the large-cap indexes, eight of the eleven GICS equity sectors finished lower on the day with Utilities (XLU), Communications (XLC), and Energy (XLE) stocks dragging on the downside. Homebuilders and home improvement retailers were among the leaders within the Hoya Capital Housing Index today ahead of Pending Home Sales data tomorrow morning.

Case Shiller National Home Price Index data this morning showed that home values soared 14.6% year-over-year in March - the 11th straight month of sequentially accelerating home prices - and the highest annual gain since late 2005. The FHFA Home Price Index, also released this week, showed a 15.7% jump in home values, the highest single month on record. Redfin (RDFN) data last week showed that a record 54% of homes were sold above their listing price over the past month while inventory levels remain near all-time lows. Nearly half of listed homes received an offer within one week while the average home sold was on the market for just 15 days.

Commercial Equity REITs

Hotel: Today, we published Time To Get Away? Fueled by vaccines and fiscal firepower, the United States has emerged as the clear global leader of the post-pandemic economic recovery, powering a robust recovery in domestic leisure travel. TSA data showed that domestic travel has recovered to 75% of pre-pandemic levels after bottoming at under 5%. STR reported that hotel occupancy has recovered to 90% of pre-pandemic levels. Hotel REITs are not out-of-the-woods, but we've become more bullish on the long-term outlook for domestic business travel. We see pockets of value in leisure-oriented hotel REITs focusing on Sunbelt markets.

Mortgage REITs

Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 1.4% today and are now off by 3.0% so far this week. Commercial mREITs declined by 1.1% today to push its weekly declines to 2.4%. New York Mortgage Trust (NYMT) launched a public offering of a new Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock which it will list on Nasdaq under the symbol "NYMTL". Net proceeds to be used for funding the redemption of all or a portion of its 7.875% Series C Cumulative Redeemable Preferred (NYMTO).

REIT Preferreds & Capital Raising

Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished lower by 0.02% today, on average, but outperformed their respective common stock issues by an average of 0.68%. So far in 2021, REIT Preferred stocks are higher by 9.60% on a price return basis. The average REIT preferred currently pays a dividend yield of 5.97% and trades at a slight premium to par value. Over in the bond markets, Starwood Property Trust (STWD) announced plans to offer $400M in unsecured senior notes due 2026 in a private offering and plans to use the proceeds to redeem its 5.00% Senior Notes due December 2021.

Economic Data This Week

The economic calendar this week is headlined by ADP Employment data on Wednesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday. Economists are looking for job growth of 675k in June, an acceleration from the 559k rate of job growth in May while the unemployment rate is expected to tick down to 5.6%. We'll also see Case Shiller HPI Home Price Index data on Tuesday, Pending Home Sales data on Wednesday, and Construction Spending data on Thursday.

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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.

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