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Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Dow 30,000 | REIT Sector Rotation | Home Prices Surge

Updated: Nov 25, 2020

Summary

  • U.S. equity markets rallied to fresh record highs Tuesday as positive vaccine developments and "market-friendly" selections for the incoming Biden administration have seemingly pulled cautious investors in from the sidelines.

  • Following a gain of 0.6% yesterday, the S&P 500 gained 1.6% today while the Dow Jones Industrial Average rallied 455-points to close above 30,000 for the first time ever.

  • The COVID-sensitive property sectors led the broad-based Equity REIT ETF (VNQ) to gains of 0.5% today with 14 of 18 property sectors in positive territory.

  • The trend of stellar housing data continued today as home prices rose by the strongest rate in at least six years across several datasets as record-setting demand for single-family housing chases record-low inventory.

  • Industrial REIT Monmouth Real Estate (MNR), one of a handful of REITs that reports earnings results outside the typical window, gained after reporting that rent collection has been nearly perfect at 99.7% from March through November.

Real Estate Daily Recap

U.S. equity markets rallied to fresh record highs Tuesday as positive vaccine developments and "market-friendly" selections for the incoming Biden administration have seemingly pulled cautious investors in from the sidelines. Following a gain of 0.6% yesterday, the S&P 500 ETF (SPY) gained 1.6% today while the Dow Jones Industrial Average (DIA) rallied 455-points to close above 30,000 for the first time ever. The COVID-sensitive property sectors led the broad-based Equity REIT ETF (VNQ) to gains of 0.5% today with 14 of 18 property sectors in positive territory. The Mortgage REIT ETF (REM), meanwhile, finished higher by 2.6%.

Consistent with the ongoing "post-vaccine sector rotation" theme we've noted for several weeks, Small Cap (SLY) and Mid-Cap (MDY) stocks have powered the rally over the past three weeks as the distribution of coronavirus vaccines are expected to begin in the United States "within weeks" and become widely available early next year. 10 of the 11 GICS equity sectors finished higher on the day, led once again by the Energy (XLE) and Financials (XLF) sectors. A strong day from the residential REITs offset declines from the homebuilders to push the Hoya Capital Housing Index to new highs following another strong slate of housing data this morning. Investors will hear a flurry of economic data tomorrow morning including New Home Sales and Jobless Claims.

The trend of stellar housing data continued as home prices rose by the strongest rate in six years as record-setting demand for single-family housing clashes with record-low inventory levels. Home values jumped 7.0% annually in September according to the S&P CoreLogic U.S. National Home Price Index released today, which was the highest annual gain since September 2014. The FHFA also announced today that its House Price Index increased 9.1% in September, the strongest rate in 14 years, "as demand continues to outpace the supply of homes available for sale." Last week, the NAR reported that prices of existing homes sold rose by 15.5% 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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