Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Daily Recap: Fed Cuts | Stocks Flat | Strong Housing Data

As expected, for the second time this decade, the Federal Reserve lowered benchmark interest rates in response to signs of slowing global economic growth and weakening inflation expectations. US equity markets reacted favorably to the policy announcement in which eight of the ten voting members agreed to lower rates by at least a quarter percentage point and rallied during the subsequent commentary, clawing back early-day losses to end the day mostly flat. The S&P 500 ETF (SPY) climbed 0.1% on the day while the Nasdaq ETF (QQQ) finished fractionally lower. In a market response that will likely be seen as a "success" for Fed Chair Powell in walking a proverbial tightrope, the 10-year yield ended slightly lower to end the day at 1.79%.

Coming off back-to-back 1% gains to start the week, the broad-based REIT ETF (VNQ) finished slightly lower, retreating by 0.3% on the day. The growth-oriented mall, hotel, and timber REIT sectors were the lone sectors in positive territory while declines were led by the industrial, student housing, and healthcare REIT sectors. Top individual performers on the day included CBL & Associates (CBL), Simon Property (SPG), Park Hotels (PK), Kimco (KIM), and Equinix (EQIX).

The Hoya Capital Housing Index, the benchmark that tracks the performance of the US housing industry, finished the day lower by roughly 0.1%, led to the upside by the Homebuilding and Mortgage Lending and Services sectors. Realogy (RLGY), Lennar (LEN), PPG Industries (PPG), Owens Corning (OC), and NVR (NVR) were among the individual best-performers on the day following better-than-expected housing starts and permitting data, which each climbed to the highest rate since 2007. The Home Furnishings sector was the relative laggard on the day.

Home construction in the US surged to the highest monthly rate in more than 12 years in August as the combination of lower mortgage rates and pent-up demographic-driven demand has spurred a recovery in new home construction following the "mini-housing recession" experienced in 2018. The US Census Bureau reported that housing starts jumped to a seasonally-adjusted annualized rate of 1,364k units, which was the strongest rate since June 2007. Despite the slow but steady recovery over the past decade, housing starts remain far below their pre-crisis average of roughly 1,600k units, indicating that the grinding post-recession recovery in home construction remains in the relatively early innings. 

Growth in housing starts significantly beat expectations in August, as the seasonally-adjusted rate of growth for total starts jumped 6.6% from August 2018. Powering this month's gains was a 13.7% jump in the volatile multifamily starts data, but single-family starts were stronger than expected as well, recording a 3.4% growth over last year. The prior month's data was revised higher as well. The strong summer for home construction comes after one of the worst eight-to-twelve months for home construction since the financial crisis. Total housing starts remain lower by roughly 2% over the past twelve months while single-family and multifamily starts have recorded -3.1% and 0.3% growth rates over the past twelve months, respectively. 



With gains of 25% so far this year, the broad-based REIT ETFs (VNQ and IYR) continue to outperform the S&P 500, which has climbed roughly 20%. The US Housing sector has climbed roughly 28% this year led by the 48% surge in Homebuilders (ITB) and strong gains from the Home Furnishings and Homebuilding Products & Materials sectors. At 1.79%, the 10-year yield has retreated by 90 basis points since the start of the year and is roughly 145 basis points below peak levels of 2018 around 3.25%.

For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Student Housing, Single-Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Shopping Centers, Hotels, Office, Storage, Timber, and Real Estate Crowdfunding.


Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.


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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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