Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Dividend Boost • Earnings Update • Housing Builds Momentum

Summary

  • U.S. equity markets were mixed Wednesday as investors parsed a busy slate of economic data and corporate earnings reports while volatility levels normalized following last week's short-squeeze frenzy.

  • Finishing higher for the third-straight day, the S&P 500 edged-higher by 0.1% today while the Dow Jones Industrial Average gained 36 points. The tech-heavy Nasdaq 100 finished slightly lower.

  • Real estate equities were mixed with the COVID-sensitive sectors rebounding while the "essential" sectors generally underperformed. The broad-based Equity REIT ETFs declined 0.3% with 12-of-19 property sectors in positive territory.

  • Data center REIT QTS Realty (QTS) boosted its dividend by 6.4%, becoming the tenth REIT to raise dividends in 2021. We expect a historic year for dividend increases following the wave of pandemic-related cuts.

  • Redfin (RDFN) reported that homebuying demand is 60% above where it was last year. Supply levels remain historically tight as 55% percent of homes for sale found a buyer in 14 days or less — the highest on record - powering an 18% surge in home prices.

Real Estate Daily Recap

U.S. equity markets were mixed Wednesday as investors parsed a busy slate of economic data and corporate earnings reports while volatility levels normalized following last week's short-squeeze frenzy. Finishing higher for the third-straight day, the S&P 500 ETF (SPY) edged-out a 0.1% gain today while the Dow Jones Industrial Average (DIA) gained 36 points. The tech-heavy Nasdaq 100 (QQQ) finished slightly lower. Real estate equities were mixed with the COVID-sensitive sectors rebounding while the "essential" sectors generally underperformed. The broad-based Equity REIT ETFs (VNQ) finished lower by 0.3% today with 12 of 19 property sectors in positive territory while Mortgage REITs (REM) pulled-back by 0.5%.

"Normalization" has been the theme over the past two days following last week's excitement as the Volatility Index (VIX) returned to "pre-squeeze" levels below 23. Better-than-expected employment data from ADP and strong PMI data pushed the 10-Year Treasury Yield back towards the highest levels since the start of the pandemic at 1.13% while investors continue to see relief in the encouraging recent trends on the spread of the pandemic. Six of the elven GICS equity sectors finished higher today, led to the upside by the Energy (XLE), Communications (XLC), and Financials (XLF) sectors.

Homebuilders and the broader Hoya Capital Housing Index were mostly higher today after Redfin (RDFN) reported that homebuying demand, which typically slows through the winter, is 60% above where it was last year. Supply levels remain historically tight as 55% percent of homes for sale found a buyer in 14 days or less—the highest on record - powering an 18% surge in home prices. Also this morning, the Mortgage Bankers Association reported that mortgage applications to purchase a single-family home - a forward-looking indicator of home sales - are now higher by 16% from last year while refinancing applications are now higher by 59% from last year.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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