Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Mortgage REITs: Short-Squeeze Nightmares

  • For Mortgage REIT investors, the recent "short squeeze frenzy" brings back painful nightmares. Mortgage REITs endured periods of violent volatility and "forced selling" during the depths of the pandemic.

  • Imploding hedging instruments inflicted permanent damage to several mREITs, but book values continue to recover towards pre-pandemic levels for stronger REITs. Several mREITs have been caught-up in the short-squeeze-frenzy as well.

  • The robust rebound and ongoing strength in the U.S. housing sector averted outright catastrophe for many mREITs. Mortgage REITs delivered a triple-digit-percentage-point rebound to end 2020 with total returns of -23.5%.

  • Despite the insane volatility and wave of dividend cuts, mortgage REITs still managed to pay a dividend equating to a 7.6% yield in 2020 and the average mREIT currently pays a forward yield of over 8%.

  • Mortgage REIT earnings season kicked-off last week. The 3 trends we're watching: 1) Updated dividend commentary, 2) Updated book values, and 3) Macroeconomic commentary on the mortgage and housing markets.

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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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Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and other important disclosures and definitions are available by clicking the links below.

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