Alex Pettee, CFA
Real Estate Daily Recap: REITs Finish Lower, But Housing Stocks Climb To Another Record
It was a déjà vu day on Wall Street as the broad-based REIT ETFs (VNQ and IYR) finished the day lower by 0.8%, the second straight day of declines. The 10-Year yield, which reached a low of 1.43% back on September 3, has jumped 27 basis points over the last week on signs of mild thawing in geopolitical and trade tensions. Growth REITs have caught a bid this week as the beaten-down mall REIT sector surged for the second straight day while yield-oriented REITs have generally underperformed over the last week. Cell Towers were again the laggard, dipping by nearly 4% on the day. The S&P 500 (SPY) finished flat on the day yet again while the Nasdaq declined by 0.3%.
The Hoya Capital Housing Index eked out another record-high today, perhaps the best counter-evidence to the "recession narrative." The gains today were led by the Real Estate Technology & Brokerage and Home Furnishings sectors, which climbed by 3.3% and 2.0% respectively. Realogy (RLGY), At Home (HOME), Zillow (Z), Sleep Number (SNBR), Redfin (RDFN), and Mohawk (MHK) led the gains on the day. Restoration Hardware (RH) jumped in after-hours trading after reporting better-than-expected earnings results.
Within the REIT sector, it was another big day for the mall REITs, were remain the lone REIT sector in negative territory for the year. CBL (CBL), Washington Prime (WPG), Pennsylvania REIT (PEI), and Tanger Outlets (SKT) each climbed by at least 6% on the day. Absent significant news, there appears to be some sector rotation rebalancing trades occurring, characterized by the big underperformance in the highest-flying sectors and the outperformance from the biggest laggards this week. SBA Communications (SBAC) and CoreSite (COR) were the two worst-performing REITs on the day.
With gains of more than 23% so far this year, the broad-based REIT ETFs (VNQ and IYR) continue to outperform the S&P 500, which has climbed roughly 19%. The US Housing sector has climbed 26% this year led by the 42% surge in Homebuilders (ITB). At 1.70%, the 10-year yield has retreated by 100 basis points since the start of the year and is roughly 155 basis points below peak levels of 2018 around 3.25%.
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