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  • Alex Pettee, CFA

Housing Shortage • REITs Lead • Virus Mutation

Summary

  • U.S. equity markets were mixed Tuesday as concerns over the ramifications of a potential virus mutation in Europe offset the approval of the long-delayed fiscal stimulus renewal in the United States.

  • Finishing lower for the third-straight day, the S&P 500 declined by 0.21% today but the tech-heavy Nasdaq 100 finished in positive territory. The Dow Jones Industrial Average retreated by 201-points.

  • Led by the "essential" property sectors, real estate equities were leaders on the day as the broad-based Equity REIT ETF finished higher by 0.7% with 13-of-18 property sectors in positive-territory.

  • Existing Home Sales in November were higher by 25.8% from last year to 6.69 million, which was the highest sales rate for November since 2005. Prices were nearly 15% higher from last year.

  • Underscoring the mounting housing shortage, inventory of existing homes dipped 22.0% from last year, representing a 2.3-month supply at the current sales pace, the lowest in the survey's history.

Real Estate Daily Recap

U.S. equity markets were mixed Tuesday as concerns over the ramifications of a potential virus mutation in Europe offset the approval of the long-delayed fiscal stimulus renewal in the United States. Finishing lower for the third-straight day, the S&P 500 ETF (SPY) declined by 0.2% today but the tech-heavy Nasdaq 100 (QQQ) finished in positive territory. The Dow Jones Industrial Average (DIA) retreated by 201 points. Led by the "essential" property sectors, real estate equities were leaders on the day as the broad-based Equity REIT ETF (VNQ) finished higher by 0.7% with 13 of 18 property sectors in positive territory. Mortgage REITs (REM) finished flat on the day.

The "reopening trade" was back in vogue today as Mid-Caps (MDY) gained 0.5% while Small-Caps (SLY) were higher by 0.4%, each outperforming the large-cap indexes. Despite that, 9 of the 11 GICS equity sectors were in negative territory on the day with just the Technology (XLK) and Real Estate (XLRE) sectors finishing higher on the day. Homebuilders and residential REITs lifted the Hoya Capital Housing Index to another day of gains as well as housing data this morning showed a mounting shortage of homes for sale.

On that point, the National Association of Realtors reported this morning that Existing Home Sales in November were higher by 25.8% from last year to 6.69 million, which was the highest sales rate for November since 2005. Sales were lower by 2.5% from last month's multi-decade highs, however. The median existing-home price was $310,800, 14.6% more than in November 2019. Seventy-three percent of homes sold in November 2020 were on the market for less than a month. We'll see New Home Sales data tomorrow.

Ironically, one of the emerging constraints on the further upside for New and Existing Home Sales is the simple lack of homes available to sell. On the existing sales side, the NAR reported that inventory of existing homes dipped 22.0% from last year, representing a 2.3-month supply at the current sales pace, the lowest in the survey's history. The inventory of new homes for sale is now lower by 13.4% from last year while the Months' Supply of new homes stands at just 3.3 months, down from a recent peak of 7.4 months late 2018.

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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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