Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

REITs Rally On Wild Week As Interest Rates Dive

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  • Amid the volatile backdrop of trade wars and geopolitical uncertainty, the US housing market may be an unlikely stabilizing force. As goes the housing sector, so goes the economy.

  • 2019 continues to be a year of rejuvenation for the single-family homebuilders after falling into a “mini-recession” in 2018. Sharply lower mortgage rates have eased affordability concerns.

  • Second-quarter earnings season may go down as the turning point for the largest US homebuilders. Order growth exceeded expectations, rising more than 6% from last year.

  • While slower-reacting data sets remain soft, forward-looking metrics like mortgage demand, homebuilder sentiment, and commentary from homebuilders have painted a brighter picture for the second half of 2019.

  • Long-term fundamentals continue to support healthy and growing demand for single-family homes in the 2020s and upward pressure on home values amid a growing housing shortage.

For the second straight week, the broad-based REIT ETFs (VNQ and IYR) rallied more than 1% as investors flocked to the domestic-focused and rate-sensitive equity sectors. The residential and technology REIT sectors were the standouts of a better-than-expected 2Q19 REIT earnings season that saw an impressive 50% of REITs raise full-year guidance expectations, well above the recent second-quarter averages. After giving up their year-to-date outperformance earlier this summer, REITs are again outperforming the S&P 500 by more than 6%.

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Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and other important disclosures and definitions are available by clicking the links below.

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