Keepin' It Real  

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Daily Recap: Trade Hopes | Stocks Slip | Week Ahead

Coming off a mixed week that saw the S&P 500 (SPY) finish lower by 0.3% and the Nasdaq (QQQ) climb by 1%, US equity markets finished lower on a relatively slow trading day on Wall Street ahead of the closely-watched trade talks between the US and China which kick off later this week. The S&P 500 retreated by 0.4% on the day while the Nasdaq fell 0.3% as the 10-Year yield ticked higher by 4 basis points. The broad-based REIT ETFs (VNQ and IYR) finished the day lower by 0.2%, led to the upside by the manufactured housing, hotel, and retail REIT sectors while the data center and net lease REIT sectors lagged.

The Hoya Capital Housing Index, the benchmark that tracks the performance of the US housing industry, finished the day lower by 0.1% on the first day of a quiet week for housing data. Last week, the Housing Index finished higher by roughly 0.3% on the week following blowout earnings from Lennar (LEN), the second-largest homebuilder in the country. Lower mortgage rates have been largely behind the recent resurgence in the single-family markets as the 30-year fixed mortgage rate is more than 130 basis points lower than its peak levels last November. Housing market completed the 'Perfect Month' in September with better-than-expected results in all six of the major housing data releases in September: Housing Starts, Building Permits, Homebuilder Sentiment, and New, Existing, and Pending Home Sales.

After a busy jobs week, inflation data highlights this week's economic calendar. PPI inflation data is released on Tuesday while CPI data comes out on Thursday. While lower oil and food prices continue to put downward pressure on the headline inflation data, core inflation (excluding food and energy) has perked up over the last three months. There are two primary factors behind this summer's acceleration in core inflation: rising core goods costs (largely related to tariffs) and rising housing costs. Housing (CPI: Shelter) accounts for more than a third of the total CPI weight (42% including housing-related services), and since 2013, housing costs have been the few persistent drivers of overall inflation.

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 17%. The US Housing sector has climbed roughly 27% this year led by the 54% surge in Homebuilders (ITB) and strong gains from the Home Furnishings and Homebuilding Products & Materials sectors. At 1.55%, the 10-year yield has retreated by 113 basis points since the start of the year and is roughly 170 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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