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  • Alex Pettee, CFA

Santa Claus Rally • Strong Holiday Spending • Week Ahead

Summary

  • U.S. equity markets advanced for the fourth-straight day Monday as recent high-frequency spending data has indicated that U.S. consumers were largely unfazed by the Omicron outbreak during the Holiday season.

  • Setting its 69th record closing high of 2021, the S&P 500 advanced 1.4% today while the Mid-Cap 400 gained 1.2% and the Small-Cap 600 climbed 1.4%.

  • Real estate equities were broadly higher today as well with the Equity REIT Index gaining 1.6% with all 19 property sectors in positive territory while the Mortgage REIT Index advanced 0.3%.

  • Mastercard reported that holiday spending rose 8.5% from a year earlier, TSA data showed a strong Holiday week of domestic travel, and perhaps most notably, Spiderman set new box office records with over $1B in revenues.

  • The economic calendar slows down in the New Year holiday-shortened week ahead, highlighted by Case Shiller Home Price data on Tuesday and Pending Home Sales data on Wednesday.

Income Builder Daily Recap

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U.S. equity markets advanced for the fourth-straight day Monday as recent high-frequency spending data has indicated that U.S. consumers were largely unfazed by the Omicron outbreak during the Holiday season. Setting its 69th record closing high of 2021, the S&P 500 advanced 1.4% today while the Mid-Cap 400 gained 1.2% and the Small-Cap 600 climbed 1.4%. Real estate equities were broadly higher today as well with the Equity REIT Index gaining 1.6% with all 19 property sectors in positive territory while the Mortgage REIT Index advanced 0.3%.

As discussed in our Real Estate Weekly Outlook, equity markets have bounced back from the Omicron-driven sell-off after governments in the U.S. and U.K. showed restraint in instituting more severe economic restrictions. U.S. consumers were unfazed by the dire headlines as Mastercard reported that holiday spending rose 8.5% from a year earlier, TSA checkpoint data showed a strong pre-Christmas week of domestic travel, and perhaps most notably, Spiderman set new box office records with over $1B in revenues.

The economic calendar slows down in the New Year holiday-shortened week ahead. On Tuesday, we'll see a pair of home price reports via the Case Shiller Home Price Index and the FHFA House Price Index which are expected to show 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.

Equity REIT & Homebuilder Daily Recap

Cell Tower: Today, 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.

Hotels: This evening, we will publish an updated report on the Hotel REIT sector for Income Builder members. We’ve seen a sharp divergence in the performance between Sunbelt-focused hotel markets and Coastal-focused hotel markets. The Top-10 Performing markets were all in the South with average RevPAR of 14% above 2019-levels. The Bottom-10 markets were in Northern urban destinations with average RevPAR that was 44% below 2019-levels in Q3. Encouragingly, recent TSA data has indicated that the Omicron effect is surprisingly muted as the domestic travel recovery has continued its recovery this holiday season after a brief pull-back in early December, and now stands at roughly 85% of 2019-levels.



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.