Keepin' It Real  

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

REIT Earnings • Tech Under Pressure • Rocket Surges

Summary

  • U.S. equity markets finished lower Tuesday following yesterday's robust rally as large-cap technologies were under renewed pressure while investors remain skittish about rising inflation expectations.

  • Giving back some of its 2.4% gains from yesterday, the S&P 500 ETF finished lower by 0.8% today while the Dow Jones Industrial Average declined by 144 points.

  • Real estate equities were mostly lower as well today despite strength from residential REITs as the broad-based Equity REIT ETFs finished off by 0.8% with 14-of-19 property sectors in negative-territory.

  • Diversified REIT Preferred Apartment Communities (APTS) finished lower by about 1% after reporting that its apartment portfolio continues to perform well, but its retail portfolio drove a nearly 30% decline in Core FFO.

  • Uniti Group (UNIT) - which owns a communications fiber network - finished lower by more than 4% after reporting that its full-year AFFO/share growth slid more than 17% in 2020.

Real Estate Daily Recap

U.S. equity markets finished lower Tuesday following the best day for the S&P 500 in nine months as large-cap technologies were under renewed pressure while investors remain skittish about rising inflation expectations. Giving back some of its 2.4% gains from yesterday, the S&P 500 ETF (SPY) finished lower by 0.8% today while the Dow Jones Industrial Average (DIA) declined by 144 points. Real estate equities were mostly lower as well today despite strength from residential REITs as the broad-based Equity REIT ETFs (VNQ) finished off by 0.8% with 14-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) gained 0.6%.

Bond markets have calmed following last week's volatility as the 10-Year Treasury Yield (IEF) declined by 3 basis points to close at 1.42%. Ten of the eleven GICS equity sectors finished lower on the day, dragged on the downside by the Technology (XLK), Consumer Discretionary (XLY), and Communications (XLC) sectors. Homebuilders and the broader Hoya Capital Housing Index were an area of strength today while housing-related financials were led by a surge in Rocket Companies (RKT) as the largest mortgage lender in the U.S. has rallied since reporting strong results last week as the housing industry continues to lead the early economic recovery.

Single Family Rentals: This afternoon, we'll publish our quarterly update on the Single Family Rental REIT sector. Riding the tailwinds of the red-hot U.S. housing market, single-family rental REITs have been one of the top-performing real estate sectors throughout the pandemic. Fueled by the maturing millennial generation, the 2020s were already poised to be a decade of "suburban revival" and behavioral changes in the post-coronavirus world have provided an added spark. We'll focus the report on the enormous impact of real estate technology in enabling the formation and fueling the future growth of the sector over the next decade.

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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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