Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Fresh Records • Homebuilders Lead • Dividend Boosts

Summary

  • U.S. equity markets climbed to fresh record highs Thursday as the long-awaited fiscal stimulus extension reportedly nears completion while strong housing data offset data showing a continued uptick in jobless claims.

  • On pace for gains of 1.6% this week, the S&P 500 finished higher by another 0.58% while the Dow Jones Industrial Average jumped 149-points and the Nasdaq 100 gained 0.65%.

  • Real estate equities were among the leaders today as the broad-based Equity REIT ETF (VNQ) finished higher by 1.0% with 14 of 18 property sectors finishing in positive territory.

  • Lennar (LEN), the nation's second-largest homebuilder, reported strong quarterly results with order growth jumping 16% from last year and provided positive 2021 guidance as the firm sees nearly 20% growth in home deliveries next year.

  • Two mortgage REITs and two equity REITs boosted their dividends over the last 24 hours. To date, 67 of the 170 equity REITs in our coverage continue to pay dividends below their pre-pandemic rates. On the other side, 50 equity REITs are now paying dividends above their 2019 rates.

Real Estate Daily Recap

U.S. equity markets climbed to fresh record highs Thursday as the long-awaited fiscal stimulus extension reportedly nears completion while strong housing data offset data showing a continued uptick in jobless claims. On pace for gains of 1.6% this week, the S&P 500 ETF (SPY) finished higher by another 0.6% while the Dow Jones Industrial Average (DIA) jumped 149 points and the tech-heavy Nasdaq 100 (QQQ) gained 0.7%. Real estate equities were among the leaders today as the broad-based Equity REIT ETF (VNQ) finished higher by 1.0% with 14 of 18 property sectors finishing in positive territory. The Mortgage REIT ETF (REM) gained 0.9% on the day.

Homebuilders and the broader Hoya Capital Housing Index were again among the leaders today on another strong slate of housing data this morning. Lennar (LEN), the nation's second-largest homebuilder, reported strong quarterly results with order growth jumping 16% from last year and provided positive 2021 guidance as the firm sees nearly 20% growth in home deliveries next year. Lennar commented, "the confluence of Millennials starting families and creating households of their own, along with the pro-housing effects of the COVID-19 pandemic, has materially strengthened demand." 9 of the 11 GICS equity sectors finished higher on the day, led by the Commerical Real Estate (XLRE), Materials (XLB), and Healthcare (XLV) sectors.

Also this morning, the Census Bureau reported that Housing Starts in November were 12.8% higher than last year while Building Permits rose 8.5% year-over-year - each above consensus estimates - as the red-hot U.S. housing industry has exhibited few signs of cooling into the winter months. The gains during the pandemic have been powered entirely by a surge in single-family home construction, which were 27.1% higher than last year. Starts on multifamily units, meanwhile, were lower by 16.0% from last year amid an ongoing post-pandemic "suburban revival." Yesterday, the NAHB reported that its Homebuilder Sentiment Index - a leading indicator of housing activity - was the second-highest on record in December with a reading of 86.

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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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