Daily Recap: REITs Gain | Solid Starts | Strong Bank Earnings
A strong start to earnings season, highlighted by better-than-expected bank earnings including Morgan Stanley (MS) this morning, propelled US equity markets to another day of gains. Both the S&P 500 (SPY) and Nasdaq (QQQ) gained 0.3% while the small-cap Russell 2000 (IWM) gained more than 1%. Economic data has been solid over the past week, but not-too-hot to derail the Fed's expected 25 basis point cut in their upcoming October meeting.
Real estate equities were generally higher on the day with the broad-based REIT ETF (VNQ) ended the day higher by 0.3%, led by the cell tower, student housing, and timber REIT sectors. The 10-Year yield finished higher by 1 basis points, boosted in part by positive news out of the UK off a potential Brexit deal. Top individual REIT performers included cell tower REITs: Crown Castle (CCI) and SBA Communications (SBAC) as well as lower-productivity mall REITs: CBL & Associates (CBL), Pennsylvania REIT (PEI),
The Hoya Capital Housing Index, the benchmark that tracks the performance of the US housing industry, finished the day at another new closing high, gaining 0.6% on the day. After surging to the highest monthly rate in 12-years in August, Housing Starts and Building Permits moderated in September, but continue to indicate strength into year-end. Seven of the eight industry groups finished in positive territory on the day, led by the home furnishings, home building products, and real estate brokerage and technology sectors. Top individual performers on the day within the housing sector included Wayfair (W), Watsco (WSO), Tempur Sealy (TPX), Lennox (LII), Sleep Number (SNBR), Redfin (RDFN), and Zillow (Z).
Yesterday, we published our Real Estate Earnings Preview. Below we compiled the notable earnings that we’re watching across the residential and commercial real estate sectors, which we will update throughout earnings season in our Real Estate Weekly Review.
As analyzed in our post on iREIT on Alpha, after surging to the highest monthly rate in 12-years in August, Housing Starts and Building Permits moderated in September, but continue to indicate strength into year-end. The combination of lower mortgage rates and pent-up demographic-driven demand has spurred a recovery in new home construction this year following the "mini-housing recession" experienced in 2018. The US Census Bureau reported that housing starts moderated from last month's 12-year highs to a seasonally-adjusted annualized rate (SAAR) of 1,256k units, which was a decline of 9% from last month, but higher by 1.6% from the same period last year.
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 next week, homebuilder sentiment climbed to the highest level since February 2018. All three subcomponents showed notable acceleration since last month, headlined by the 54 print in buyer traffic, which was the first read over breakeven 50 since last October. All four regional indexes ticked higher on a three-month average, led by continued strength in the West and South regions.
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.
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