Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

REITs: A Year To Forget

Summary

  • U.S. equity markets finished a tumultuous 2020 at record-highs despite the unprecedented ongoing global pandemic, rallying back from a historic market sell-off that push financial markets to the absolute brink.

  • Ending the year with gains of more than 16%, the S&P 500 finished higher by 0.6% today while the Dow Jones Industrial Average gained 197 points to close at fresh record-highs.

  • Real estate equities were mostly higher on the day as the broad-based Equity REIT ETF (VNQ) gained 1.0% with 16-of-19 property sectors in positive territory, but ended 2020 lower by 8.5%.

  • The gains today were aided by encouraging employment data this morning. Initial Jobless Claims ticked lower to 787k - four-week lows - showing signs of improvement after an uptick in December. Continuing Claims decreased to 5.21 million, down another 100k from last week.

  • 130 of 170 equity REITs finished in negative territory for the year with five REITs recording declines of over 80%. 35 of 41 mortgage REITs recorded declines in 2020. "Essential" property sectors - housing, technology, and logistics - were the bright-spots.

Real Estate Daily Recap


U.S. equity markets finished a tumultuous 2020 at record-highs despite the unprecedented ongoing global pandemic, rallying back from a historic market sell-off in March that push financial markets to the absolute brink. Ending the year with gains of more than 16%, the S&P 500 ETF (SPY) finished higher by 0.6% today while the Dow Jones Industrial Average (DIA) gained 197 points to close at record-highs. Real estate equities were mostly higher on the day as the Equity REIT ETF (VNQ) gained 1.0% with 16 of 19 property sectors in positive territory, but ended the year off by 8.4%. The Mortgage REIT ETF (REM) gained 0.6% but ended the year lower by 28.5%.

Ten of the eleven GICS equity sectors finished in positive territory today led by three of the four sectors that finished the year in the red: Utilities (XLU), Commercial Real Estate (XLRE), and Financials (XLF). Small-Caps (SLY) gained 0.1% and Mid-Caps (MDY) rose by 0.2%, each closing within a half-percent of their record highs set earlier in the week. Bitcoin (BTC-USD) surged another 10.6% to also close at fresh records. Another strong day from Residential REITs and housing-related financials offset a continued pullback from the homebuilders as the Hoya Capital Housing Index finished flat.

The gains today were aided by encouraging employment data this morning. Initial Jobless Claims ticked lower to 787k - four-week lows - showing signs of improvement after an uptick in December. Continuing Claims decreased to 5.21 million, down another 100k from last week. Since the peak in early May at nearly 25 million, Continuing Claims have retreated by 19.7 million. As discussed in our Real Estate Weekly Outlook, the newly-signed stimulus package will provide an additional $300 per week in enhanced unemployment benefits, in addition to direct payments of $600 to most Americans, and will provide additional funds for the Paycheck Protection Program extension.

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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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