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  • Alex Pettee, CFA

Rents Soar • Jobs Report • OPEC Limbo

Summary

  • U.S. equity markets gained for the seventh-straight day Friday heading into the Independence Day long weekend following a better-than-expected jobs report that eased some concern over labor market shortages.

  • Gaining on all five days this week and closing at record-highs, the S&P 500 finished higher by 0.8% today but the Mid-Cap 400 declined by 0.4% and Small-Caps slid 1.1%.

  • Real estate equities were among the leaders today as the Equity REIT Index gained 0.3% with 15-of-19 property sectors in positive territory while Mortgage REITs declined by 0.6%.

  • Data provider Yardi revealed that multifamily rents rose at a record-setting pace in May. Rent growth continues to be led by Sunbelt market, but urban markets have shown recent strength.

  • The pace of hiring - the strongest in 10 months - comes as additional states have begun to phase-out the supplemental pandemic-related unemployment benefits which - in some cases - resulted in higher pay than the employment alternative.

Real Estate Daily Recap

U.S. equity markets gained for the seventh-straight day Friday heading into the Independence Day long weekend following a better-than-expected jobs report that eased some concern over labor market shortages. Gaining on all five days this week and closing at record-highs, the S&P 500 finished higher by 0.8% today but the Mid-Cap 400 declined by 0.4% and Small-Caps slid 1.1%. Real estate equities were among the leaders today as the Equity REIT Index gained 0.3% with 15 of 19 property sectors in positive territory while the Mortgage REIT Index finished lower by 0.6%.

Nine of the eleven GICS equity sectors finished higher on the day, led to the upside by the large-cap Technology (XLK) and Communications (XLC) names. The Energy (XLE) sector lagged as the closely-watched OPEC output agreement remained in limbo. Residential REITs were the outperformers in the Hoya Capital Housing Index on fresh data showing a record-setting rise in apartment rents in May. We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

The Bureau of Labor Statistics reported this morning that the U.S. economy added 850k jobs in June - an acceleration following several months of disappointing data and above the consensus estimates of 700k. The strong BLS jobs report on Friday followed better-than-expected ADP Employment and Initial Jobless Claims data earlier in the week. The pace of hiring - the strongest in 10 months - comes as additional states have begun to phase-out the supplemental pandemic-related unemployment benefits which - in some cases - resulted in higher pay than the employment alternative.

The leisure and hospitality sector as well as the retail sector led the recovery in June while hiring in Goods-Producing sectors including manufacturing, mining and logging, and construction sectors were again disappointing despite historic shortages across many of these industries. The overall unemployment rate held steady at 5.8% as improvement from the 26 states that have opted out of the enhanced federal unemployment benefits, was offset by continued weakness from the 24 others states that continue to distribute the $1,200 federal supplemental on top of their state unemployment benefits. Six states are still reporting unemployment rates over 7.5%: California, New York, Connecticut, Hawaii, Nevada, and New Mexico.

Commercial Equity REITs

Apartments: Data provider Yardi revealed that multifamily rents rose at a record-setting pace in May in a fresh report published yesterday afternoon. May 2021’s rent increase of 0.88% compared to April was the largest month-to-month average jump since Yardi Matrix started collecting rent data. That all-time high comes after April posted the third-highest increase recorded and Yardi forecasts continued strong rent growth over the next several months. Per the Zillow (NASDAQ:Z) ZORI Rent Index, the median U.S. apartment market has seen an acceleration in rent growth over the last year to 5.0% - the highest since 2016 - even as many of the largest markets continue to report declining rents on a year-over-year basis.

Mortgage REITs

Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 1.0% today to end the week with declines of 3.2%. Commercial mREITs slipped 1.3% today to push their weekly declines to 3.5%. MFA Financial (MFA) announced today that it completed its previously announced acquisition of Lima One Holdings, a leading nationwide originator and servicer of business purpose loans for real estate investors. Lima One's executive leadership team has joined MFA, and they will continue to manage Lima One's business from its base in Greenville, South Carolina.

REIT Preferreds & Capital Raising

Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.15% today, on average, and outperformed their respective common stock issues by an average of 0.94%. So far in 2021, REIT Preferred stocks are higher by 9.93% on a price return basis. American Homes 4 Rent (AMH) completed the previously-announced redemption of its 6.350% Series E Preferred (AMH.PE).

Economic Data This Week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report on Saturday morning.

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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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