Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Improbable Records | Housing Starts Surge | Post Office REIT

Daily Recap

  • U.S. equity markets finished mostly higher Tuesday with the S&P 500 climbing to all-time record highs, a seemingly unfathomable feat back in late-March as tremors of instability shook financial markets.

  • Following gains of 0.3% yesterday, the S&P 500 finished higher by 0.2% today and eclipsed the prior record-high set on February 19. The Dow declined modestly while the Nasdaq climbed.

  • After gaining 0.8% yesterday, Equity REIT ETFs finished lower by 0.5% today with 15 of 18 property sectors finishing in negative territory. Mortgage REITs declined by 0.8%.

  • Housing Starts and Building Permits surged in July as the U.S. housing industry continues to lead the early stages of the post-pandemic economic recovery.

  • Small-cap Postal Realty (PSTL) is suddenly a hot name amid the political firestorm brewing over the U.S. Postal Service and its role in the upcoming U.S. elections.

U.S. equity markets finished mostly higher Tuesday with the S&P 500 climbing to all-time record highs, a seemingly unfathomable feat back in late-March as tremors of instability shook financial markets. Following gains of 0.3% yesterday, the S&P 500 ETF (SPY) finished higher by 0.2% today and eclipsed the prior record-high set on February 19. Following a similar pattern as Monday, the Dow Jones Industrial Average (DJI) dipped 67 points while the Nasdaq 100 (QQQ) jumped 1.0%. After gaining 0.8% yesterday, the Equity REIT ETF (VNQ) finished lower by 0.5% today with 15 of 18 property sectors finishing in negative territory. The Mortgage REIT ETF (REM) declined by 0.8% after falling 0.9% yesterday.

The historic and improbable rebound completes a roughly 125-trading-day "round trip" for U.S. equity markets that saw the major indexes plunge more than 30% from late February through late March before rallying more than 50% over the subsequent four months. The most recent leg of the rally comes amid a continued deceleration in coronavirus case counts and better-than-expected economic data and corporate earnings results, even as the fiscal stimulus that powered the early stages of the rally appear uncertain to continue. It was a "top-heavy" day of performance, however, with only 5 of the 11 GICS equity sectors finishing higher on the day while the Small-Cap (SLY) and Mid-Cap (MDY) indexes were each lower by roughly 1%.

Homebuilders and the broader Hoya Capital Housing Index finished mixed despite another slate of strong housing data this morning. Housing starts jumped 22.6% in July to a seasonally adjusted annual rate of 1.50 million units while building permits rose 18.8% to a rate of 1.50 million units, each above consensus estimates. This follows homebuilder sentiment data yesterday which showed a 6 point-jump to 78 in July, setting a new record-high for the NAHB's Housing Market Index. Gains were led by record-highs in the Home Buyer Traffic index, which rose to 65 in August. The rebound in housing market activity has been aided by longer-term macroeconomic trends of favorable millennial-led demographics, historically low housing supply, early signs of a "suburban revival," and record low mortgage rates.

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