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  • Alex Pettee, CFA

REITs Lead • Quarantine Cuts • Home Values Rise

Summary

  • U.S. equity markets snapped a four-day winning streak Tuesday in another relatively quiet trading session as investors parsed the economic impact of reduced quarantine requirements from the CDC.

  • Retreating from yesterday's 69th record closing high of 2021, the S&P 500 slipped 0.2% today while the Mid-Cap 400 declined 0.1% and the Small-Cap 600 declined 0.2%.

  • Real estate equities were among the leaders today as the Equity REIT Index advanced 0.4% with 13-of -19 property sectors in positive territory while the Mortgage REIT Index advanced 0.1%.

  • Case Shiller Home Price Index data today showed that national home prices rose 19.1% in October - down from 19.5% in September - marking the second-straight month of moderating home price appreciation.

  • After the breakneck surge in housing market activity in early 2021 and subsequent summer cooldown, recent data indicate that conditions have settled into a more sustainable positive trajectory.

Income Builder Daily Recap

We recently launched Hoya Capital Income Builder - a premier income-focused investment research service through Seeking Alpha Marketplace - that will be the new exclusive home of all of Hoya Capital's investment research. Income Builder focuses on real income-producing asset classes that offer the opportunity for diversification, monthly income, capital appreciation, and inflation hedging. If you're not already on board, give us a try with a completely risk-free two-week trial and take a look around.

U.S. equity markets snapped a four-day winning streak Tuesday in another relatively quiet trading session as investors parsed the economic impact of reduced quarantine requirements and recommendations from the CDC. Retreating from yesterday's 69th record closing high of 2021, the S&P 500 slipped 0.2% today while the Mid-Cap 400 declined 0.1% and the Small-Cap 600 declined 0.2%. Real estate equities were outperformers today as the Equity REIT Index advanced 0.4% with 13-of -19 property sectors in positive territory while the Mortgage REIT Index advanced 0.1%.

The 10-Year Treasury Yield was unchanged on the day, keeping the 10/2 yield curve at the flattest level since late 2020. Domestic-focused and yield-sensitive sectors were the leaders today among the 11 GICS equity sectors with Utilities (XLU), Consumer Staples (XLP), and Materials (XLB) leading to the upside. Meanwhile, Homebuilders and the broader Hoya Capital Housing Index climbed to fresh record highs today on a busy slate of home price data today and ahead of Pending Home Sales data tomorrow morning.

Following a better-than-expected slate of housing data over the prior two weeks, Case Shiller Home Price Index data today showed that national home prices rose 19.1% in October - down from 19.5% in September - marking the second-straight month of moderating home price appreciation following an incredible streak of 15 consecutive months of sequential acceleration in the year-over-year growth rate. After the breakneck surge in housing market activity in early 2021 and subsequent summer cooldown, recent data indicate that conditions have settled into a more sustainable positive trajectory.

Equity REIT & Homebuilder Daily Recap

Hotels: Today, we published Hotel REITs: Tale of Two Americas, an exclusive report on the Hotel REIT sector for Income Builder members. Encouragingly, recent TSA travel data has indicated that the Omicron effect is surprisingly muted as the domestic travel recovery has continued this holiday season after a brief pull-back in early December. Hotel occupancy - which is closely correlated with domestic airline travel - has exhibited similar resilience over the past two quarters and managed to climb back above the 20-Year average in early December for the first time since the pandemic began. In the report, we discussed our top picks in the sector and our updated outlook.

Cell Tower: Yesterday, we published Cell Tower REITs: Living On The Edge. Cell Tower REITs have been one of the primary 'growth engines' of the REIT sector, but are poised to snap their six-year-streak of outperformance versus the REIT Index this year. The recent slump began around mid-year as several risk factors emerged including potential competition from Low-Earth-Orbit satellite networks and delays in 5G deployment over airline interference concerns. The near- and medium-term outlook for cell tower REITs remains promising, but some caution is warranted given their potential longer-term technological risk.

Economic Data This Week

The economic calendar slows down in the New Year week ahead. On Tuesday, we saw a pair of home price reports via the Case Shiller Home Price Index and the FHFA House Price Index which showed robust - but slowly normalizing - rates of home price appreciation in October at 17-18%, down from a recent peak above 20%. On Wednesday, we'll see Pending Home Sales data for November, which is expected to show a continued acceleration following a strong October. U.S. equity markets will be open on Friday despite the NYE Holiday, but bond markets will close early.


We're excited to announce the launch of our new investment research service here on Seeking Alpha - Hoya Capital Income Builder. We've put together a great team of contributors from across the REIT, dividend, and ETF industry, so whether your focus is High Yield or Dividend Growth, we’ve got you covered with high-quality, actionable investment research and a comprehensive suite of tools and models to help build sustainable portfolio income targeting premium dividend yields of up to 10%. And of course, subscribers receive complete access to our investment research - including reports that are never published elsewhere - from Hoya Capital and our team of contributors.

Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

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 Research & Index Innovations is an affiliated index provider and research firm that builds custom indexes tracking U.S. commercial and residential real estate sectors, including indexes tracked by exchange-traded funds (ETFs). 

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