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  • Alex Pettee, CFA

Fresh Records • Housing Heats-Up • Merry Christmas

Summary

  • U.S. equity markets advanced for the third-straight day heading into the Christmas holiday as strong housing data offset economic data showing persistent inflation and slowing consumer spending.

  • Closing the week at fresh record-highs and snapping a two-week skid, the S&P 500 advanced 0.6% today while the Mid-Cap 400 gained 0.7% and the Small-Cap 600 climbed 0.5%.

  • Real estate equities were mixed today, however, as the Equity REIT Index slipped 0.1% today with 8-of-19 property sectors in positive territory while Mortgage REITs advanced 1.0%.

  • Housing market data brought some much-needed "cheer" to the broader market. A "gift that keeps on giving," the U.S. housing industry has provided stability during times of economic uncertainty over the past two years.

  • New Home Sales climbed to a seven-month high in November, according to data released this morning by the BLS, rising more than 12% from last month as supply chain bottlenecks slowly begin to ease.

Income Builder Daily Recap

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U.S. equity markets advanced for the third-straight day heading into the Christmas holiday as strong housing data offset economic data showing persistent inflation and slowing consumer spending. Closing the week at fresh record-highs and snapping a two-week skid, the S&P 500 advanced 0.6% today while the Mid-Cap 400 gained 0.7% and the Small-Cap 600 climbed 0.5%. Real estate equities were mixed today, however, as the Equity REIT Index slipped 0.1% today with 8-of-19 property sectors in positive territory while Mortgage REITs advanced 1.0%.

On a busy week of last-minute holiday shopping and travel, housing market data brought some much-needed "cheer" to the broader market. A "gift that keeps on giving," the U.S. housing industry has continued to provide stability during times of economic and market uncertainty over the past two years, and has built strength over the past quarter. New Home Sales climbed to a seven-month high in November, according to data released this morning by the BLS, rising more than 12% from last month as supply chain bottlenecks slowly begin to ease. Meanwhile, Existing Home Sales increased for a third-straight month in November to fresh 10-month highs, according to data published yesterday by the NAR.

Elsewhere, the BEA reported this morning that consumer prices in the US continued surging in November with the PCE Price Index - the Fed's "preferred" measure of inflation- rising more than 5.7% from last year - the highest rate of inflation in more than three decades. The headline PCE Index rose 0.6% in November - roughly matching expectations - while the Core PCE Index rose 0.5% from the prior month, which was above consensus estimates. Driving the gains was a 30% year-over-year surge in energy prices and a 5% increase in food prices - issues that have resulted in a sharp decline in consumer confidence metrics since late August.

Equity REIT & Homebuilder Daily Recap

Cell Tower: Today, we published Cell Tower REITs: Living On The Edge as an exclusive report for Income Builder marketplace subscribers which discusses our revised outlook and top picks within the sector. Cell Tower REITs have been one of the primary 'growth engines' of the REIT sector, but are poised to snap their six-year-streak of outperformance versus the REIT Index this year. The near- and medium-term outlook for cell tower REITs remains promising, but some caution is warranted given their potential longer-term technological risk. We believe that current valuations adequately discount this risk.

Casinos: Earlier this week, we published Casino REITs: The House Always Wins. Casino REITs - the highest dividend-yielding REIT sector - have slumped over the last quarter amid renewed COVID concerns, but continue to provide strong value for income-oriented investors. Despite their ultra-long term triple net lease structures, casino REITs provide excellent inflation hedging characteristics. VICI Properties (VICI), in particular, has one of the most inflation-hedged lease structures of any REIT. We remain bullish on the Casino REIT sector as a whole, which we view as a more compelling - and perhaps "under the radar" - alternative to other seemingly "cheap" sectors facing stiffer secular headwinds.

Economic Data This Week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report published this weekend.


We're excited to announce the launch of our new investment research service here on Seeking Alpha - Hoya Capital Income Builder. We've put together a great team of contributors from across the REIT, dividend, and ETF industry, so whether your focus is High Yield or Dividend Growth, we’ve got you covered with high-quality, actionable investment research and a comprehensive suite of tools and models to help build sustainable portfolio income targeting premium dividend yields of up to 10%. And of course, subscribers receive complete access to our investment research - including reports that are never published elsewhere - from Hoya Capital and our team of contributors.

Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

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.