Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

REIT Earnings • Stimulus Talks • Jobs Data

Summary

  • U.S. equity markets rallied Thursday, adding to its strong weekly gains following a better-than-expected slate of employment data and earnings reports while recent coronavirus data has exhibited encouraging trends.

  • Pushing its week-to-date gains to nearly 4.5%, the S&P 500 ETF (SPY) finished higher by 1.1% while the Dow Jones Industrial Average (DIA) added another 333 points.

  • Real estate equities were mostly higher today as earnings season kicks into gear as the broad-based Equity REIT ETFs finished higher by 0.7% today with 16-of-19 property sectors in positive-territory.

  • Data center REIT CoreSite (COR) finished lower by nearly 5% after providing softer-than-expected guidance for 2021. COR sees 3.0% FFO growth with flat rent growth amid heightened competition from big-tech hyperscalers and other private market players.

  • Meanwhile, earnings results yesterday afternoon from sunbelt-focused Mid-America (MAA) and coastal-focused and AvalonBay (AVB) underscored the ongoing bifurcation in apartment rent growth and operating performance between geographies.

Real Estate Daily Recap

U.S. equity markets rallied Thursday, adding to its strong weekly gains following a better-than-expected slate of employment data and earnings reports while recent coronavirus data has exhibited encouraging trends. Pushing its week-to-date gains to nearly 4.5%, the S&P 500 ETF (SPY) finished higher by 1.1% while the Dow Jones Industrial Average (DIA) added another 333 points. Real estate equities were mostly higher today as earnings season kicks into gear as the broad-based Equity REIT ETFs (VNQ) finished higher by 0.7% today with 16 of 19 property sectors in positive territory while Mortgage REITs (REM) gained 1.4%.

Stimulus talks returned to the forefront as lawmakers begin to zero-in on plans for another large - but likely more targeted - relief package that is likely to exceed $1 trillion. Ten of the eleven GICS equity sectors finished higher on the day, led to the upside by the Financials (XLF) sector as the 10-Year Treasury Yield (IEF) climbed to the highest level since March as investors price-in an improving economic outlook and additional stimulus measures. Homebuilders and the broader Hoya Capital Housing Index were higher again today while Small-Caps (MDY) and Mid-Caps (MDY) continued their outperformance.

Today's strong performance aided by encouraging employment data this morning as Initial Jobless Claims pulled back for the third-straight week. Initial Claims declined to 779k, down from 812k in the prior week while Continuing Claims ticked lower to 4.59m from 4.79m in the prior week. Since the peak in early May at nearly 25 million, Continuing Claims have retreated by 20.3 million. This solid data comes ahead of the BLS Nonfarm Payrolls report tomorrow as economists are looking for job growth of 50k in January while the unemployment rate is expected to remain steady at 6.7%.

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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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