Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

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.

Hoya Capital is excited to announce that we’ve teamed up with iREIT to cultivate the premier institutional-quality real estate research service on Seeking Alpha! In addition to having access to all of iREIT's existing offerings including REIT Ratings on 100+ companies, model portfolios, and much more, iREIT subscribers will now get exclusive access to our expanded real estate coverage including:

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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