Keepin' It Real  

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Daily Recap: Real Estate Rally | Oil Retreats | Confident Homebuilders

Following yesterday's historic surge in crude oil prices following this weekend's drone attacks on Saudi Arabia's oil industry, oil futures and oil-tracking ETFs (USO) retreated by more than 4% on reports that oil production will be brought back online to pre-attack levels "within weeks." Perfectly offsetting Monday's declines, the S&P 500 ETF (SPY) climbed by 0.3% and the Nasdaq ETF (QQQ) gained 0.5% on the day. Ahead of a critical Fed meeting tomorrow in which the committee is expected to cut short-term rates by 25 basis points, the 10-year yield retreated by 3 basis points, finishing the day at 1.81%.

Coming off a 1.0% gain yesterday, the broad-based REIT ETF (VNQ) added to it's weekly gains, climbing by 0.9%. Gains in the REIT sector were led by the cell tower, healthcare, and net lease REIT sectors with strong individual performances from Crown Castle (CCI), Ventas (VTR), HCP (HCP), and SBA Communications (SBAC). The hotel and mall REIT sectors were the relative laggards on the day with weak performance from retail REITs Washington Prime (WPG), Tanger (SKT), and Taubman (TCO).

The Hoya Capital Housing Index, the industry benchmark that tracks the GDP-weighted performance of the US housing industry, finished the day higher by roughly 0.4%, led to the upside by the Residential REIT and Homebuilding sectors. KB Home (KBH), Tri Pointe (TPH), Whirlpool (WHR), and Meritage (MTH) were among the individual best-performers on the day following better-than-expected homebuilder sentiment data. The Real Estate Brokerage & Technology sector was the relative laggard on the day.

With the slower-reacting data finally beginning to see the positive effects of lower mortgage rates, the more forward-looking housing market indicators continue to point to a solid back-half of 2019. Ahead of the closely-watched housing starts data tomorrow and existing home sales data on Thursday, homebuilder sentiment climbed to the highest level since October 2018. Powering the gains was the current sales sub-index, which rose to the highest level since March 2018. Consistent with recent home sales and starts data, the South and West regions continue to drive the gains, but the Northeast region matched a multi-decade-high at 65 in September.

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 1.81%, the 10-year yield has retreated by 87 basis points since the start of the year and is roughly 140 basis points below peak levels of 2018 around 3.25%.

With equity markets flirting with new all-time highs, the Federal Reserve is expected to walk a tight-rope in tomorrow's meeting, where the committee is widely expected to cut interest rates by a quarter-point. Expectations of easing monetary policy have been a key factor in the stabilization in key economic sectors this year and have been the driving force behind the reacceleration in the single-family housing markets. 

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, LLC

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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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