Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

Apartment REITs
Data Center REITs
Mall REITs
Net Lease REITs
Hotel REITs
Single Family Rental REITs
Mobile Home REITs
ETF express.png
  • Alex Pettee, CFA

Daily Recap: Stocks Pause | REITs Gain | Millennials Buying Homes

Updated: Oct 30, 2019

After setting new all-time closing highs yesterday, the S&P 500 ETF (SPY) took a breather today, ending the day lower by 0.1% on another jam-packed day of economic data and earnings. Housing data was better-than-expected this morning with solid pending home sales data and encouraging homeownership data that showed that millennial ownership rates (<35 years old) jumped to the highest level since 2011. Weaker-than-expected results from Alphabet (GOOG) weighed on tech-focused indexes as the Nasdaq ETF (QQQ) was down by 0.8% on the day. Real estate equities were generally higher on the day as the busiest week of real estate earnings season kicks into high gear. The broad-based REIT ETF (VNQ) ended the day higher by 0.2%, led to the upside by the timber, healthcare, and storage REIT sectors while the student housing, mall, and hotel sectors lagged. The 10-year Treasury Yield (IEF) ticked lower by 2 basis points, closing at 1.84%, which remains near the upper end of the three-month range.

The Hoya Capital Housing Index, the benchmark that tracks the performance of the US housing industry, finished the day lower by 0.3% on softness from the home improvement retail and real estate technology brokerage sectors. Home building products firms Leggett & Platt (LEG) and Simpson Manufacturing (SSD) led the way following strong earnings results yesterday afternoon. Senior housing REIT Welltower (WELL) delivered a strong day after better-than-expected results yesterday afternoon, a welcome relief after a worrisome report from senior housing peer Ventas (VTR) last week. On the earnings slate among US Housing Index components this afternoon is single-family rental operator Invitation Homes (INVH), apartment owner UDR (UDR), self-storage operators Public Storage (PSA) and ExtraSpace (EXR), and title insurer Fidelity National (FNF). 

The day after Prologis (PLD) announced a deal to acquire Liberty Property Trust (LPT) in a $12.6B, we got another mega-deal announced today. Data Center REIT stalwart Digital Realty (DLR) announced a deal to acquire European data center operator Interxion (INXN) in an $8.4B deal which will significantly expand DLR's global data center platform. For the commercial real estate industry, the busiest week of earnings season continues, highlighted by reports from retail REITs Taubman (TCO), Retail Properties (RPAI), Weingarten (WRI) and Pennsylvania REIT (PEI), in addition to the housing REITs mentioned above. We'll have full coverage of earnings season on the iREIT on Alpha Marketplace.

This morning, the National Association of Realtors reported that Pending Home Sales beat estimates in September, rising by 3.9% on a year-over-year basis. This rate of annual growth was the largest annual increase since 2015, providing another piece of evidence that we are indeed seeing a sustained acceleration in the single-family housing markets following the worst year for the homebuilding (XHB and ITB) sector since the end of the recession.

Last week, we discussed that New Home Sales surged 15.5% from last year to a seasonally adjusted annualized rate of 701k following 706k in August, the first consecutive 700k prints in more than 12 years. Earlier in the week, the Existing Home Sales indicated that sales were higher by 3.9% on a year-over-year basis, the strongest rate of growth since early 2017.

Home prices also showed signs of firming in today's Case Shiller data. National Home Prices rose 3.2% from last year, up from 3.1% in the prior month, the first sequential uptick since early 2018. Completing the trifecta of strong housing data this morning, the homeownership rate unexpectedly jumped to match the highest rate since 2014 as household formations remain strong. The <35 year-old ownership rate surged to the highest since 2011.

Gains in the homeownership rate, however, did not come at the expense of the rental markets. Housing markets remain historically tight as the vacancy rate for both rental and owner-occupied units remains at or near 40-year lows. The rental vacancy remained steady at 6.8% in the third quarter, still just 20 basis points above 40-year lows. The homeowner vacancy rate climbed 10 basis points to 1.4%, ticking marginally higher from last month's 1.3% rate, which was the lowest rate since 1981. 

Instead, gains in the homeownership rate came as a result of gains in total household formations. Total household formations rose by nearly 2% in 2018, the strongest year for formations since 1985, and solid growth has continued into 2019. At 123.1 million households in September, household formations rose 1.5% from the prior year, near the upper end of the historic range. Given the abnormally large 5-year cohort of 25-29 year-olds, we think that the household formation rate will see continued gradual increases over the next five years as this "mini-generation" enters prime first-time homebuying age.

As discussed in our Weekly Outlook, the "data dump" of economic data continues tomorrow with the first look at third-quarter GDP before the critical Fed interest rate decision in the afternoon. On Thursday, we'll see PCE inflation data, and then on Friday, we'll get a look at the nonfarm payrolls report for October. Throughout the week, we'll hear from more than 140 S&P 500 companies in the busiest week of earnings reports this quarter. Buckle up.

Visit our website for free access to our full research library including coverage of 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.

  • Facebook Social Icon
  • Twitter Social Icon
  • LinkedIn Social Icon

Hoya Capital Real Estate, LLC

(833) HOYA-CAP

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.

Privacy Policy 

 Client Relationship Summary 

Hoya Capital's ADV Part 2

Important Disclosures, Definitions, & List of Holdings 


The Easy Way To Invest In Real Estate