Economics, Housing, & Commercial Real Estate Analysis

Keepin' It Real 

Apartment REITs
Homebuilders 1.png
Data Center REITs
Mall REITs
Net Lease REITs
Housing100logo.png
  • Alex Pettee, CFA

Sell-Off Intensifies, Spreads To REITs [Daily Recap]

  • The sell-off intensified on Tuesday for U.S. equity markets amid escalating concerns over the coronavirus outbreak as the major indexes wiped out their gains for the year.

  • Following 3% declines yesterday, the S&P 500 finished lower by another 3.0% today while the Dow Jones Industrial Average dipped by more than 875 points after sliding 1,000 points yesterday.

  • The 10-Year Treasury Yield dipped to a historic intra-day low below the previous 2016-lows of 1.32% as investors begin to price in a more aggressive monetary policy response.

  • Not even the domestic-focused real estate sector could escape the contagion today as the broad-based commercial Real Estate ETF (VNQ) finished lower by 2.7%, but still delivering another day of relative outperformance.

  • Lost in the contagion fears were strong earnings from Home Depot and residential brokerage firm Realogy, each citing strengthening fundamentals in the US housing market.

Real Estate Daily Recap

The sell-off intensified on Tuesday for U.S. equity markets amid escalating concerns over the coronavirus outbreak as the major indexes wiped out their gains for the year. Following 3% declines yesterday, the S&P 500 ETF (SPY) finished lower by another 3.0% today while the Dow Jones Industrial Average (DIA) dipped by more than 875 points after 1,000 point losses yesterday. The 10-Year Treasury Yield (IEF) dipped to a historic intra-day low below the previous 2016-lows of 1.32% as investors begin to price in a more aggressive monetary policy response from the Federal Reserve. Not even the domestic-focused real estate sector could escape the contagion today as the broad-based commercial Real Estate ETF (VNQ) finished lower by 2.7%, but still delivering another day of relative outperformance.

A sell-off from the recently high-flying single-family homebuilding sector weighed on the Hoya Capital Housing Index, the benchmark that tracks the performance of the US Housing Industry, despite additional signs of underlying housing market strength. Realogy (RLGY) was one of few stocks in the green today after the brokerage firm reported very strong earnings results, citing "improving fundamentals across the housing market" and low mortgage rates which are "expected to remain a tailwind for the industry throughout 2020." Home improvement retailer Home Depot (HD), the largest component in the housing index, was a source of relative strength today as well after reporting strong fourth-quarter results with comparable sales up 5.3%. On the data front, home price data this morning from Case Shiller and the FHFA showed a continued reacceleration in home values, driven by strong demographic-driven demand and lower mortgage rates.

Taking a step back and looking at the sector performance on a year-to-date basis, we see that the Utilities (XLU), Communications (XLC), and Real Estate (VNQ) ETFs have been the top-performing sectors this year while the Energy (XLE), Materials (XLB), and Financials (XLF) have been laggards. For the year, commercial REITs are higher by 3.0% and residential real estate stocks are higher by 1.2%, each delivering solid outperformance compared to the 2.9% declines from the S&P 500. REITs delivered their second-best year of the decade in 2019, delivering a total return of nearly 29% compared to the 31% total returns from the S&P 500.

All eighteen REIT sectors were in negative territory for the day, buoyed on the upside by the manufactured housing and cell tower REIT sector. Cell tower REIT American Tower (AMT) was a leader after posting better-than-expected results last quarter, capping off another strong year in which U.S. organic tenant billings (effectively same-store NOI) grew more than 7% and as the firm added 14,000 communications sites. National Storage Affiliates (NSA) was also a solid outperformer after reporting results yesterday afternoon, achievings strong same-store NOI growth of 5.0% in 2019, tops in the self-storage sector. Net lease REITs Spirit Realty (SRC) and EPR Properties (EPR) each reported generally in-line results yesterday afternoon.

The tourism-senstive hotel REITs and politically-sensitive prison REITs dragged on the downside today. Hersha Hospitality (HT) was among the biggest laggards after the hotel REIT missed on fourth-quarter earnings with comparable-hotel revPAR falling 1.4% year-over-year and forecast guidance on the soft-side. Small-cap apartment REIT Preferred Apartments (APTS) slide more than 11% as investors remain skeptical on their internalization plans despite a solid quarter of property-level fundamentals, consistent with rental strength reported by the major apartment REITs.

Reporting after the close today includes billboard REIT Outfront (OUT), storage REIT Public Storage (PSA), healthcare REIT Community Healthcare (CHCT), and mall REIT Pennsylvania REIT (PEI), among others. Our Real Estate Earnings Preview compiled the notable earnings that we're watching across the residential and commercial real estate sectors. We'll have additional coverage on iREIT on Alpha as well as our Real Estate Weekly Outlook.


To continue reading, click here to visit Seeking Alpha!

Hotel REITs
Single Family Rental REITs
Mobile Home REITs
Healthcare REITs
prison REITs overview.png
  • Facebook Social Icon
  • Twitter Social Icon
  • LinkedIn Social Icon

Hoya Capital Real Estate, LLC

Invest@HoyaCapital.com

(833) HOYA-CAP

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. Nothing on this site is intended to be investment advice or an offer to buy or sell securities. The risks of investing in real estate securities are similar to those associated with direct investments in real estate, including falling property values, lack of liquidity, limited diversification, and sensitivity to certain economic factors such as interest rate changes and market recessions. No representation or warranty is made as to the efficacy of any particular strategy or fund, or the actual returns that may be achieved. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. Data quoted represents past performance, which is no guarantee of future results. The views and opinions in the preceding commentary are as of the date of publication and are subject to change without notice. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital, and there is no guarantee that investors will experience the type of performance reflected. There is no guarantee that any historical trend illustrated herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any trend cited in this market commentary will be realized. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice, is not intended to predict or depict performance of any investment and does not constitute a recommendation or an offer for a particular security. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as investment advice or as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing.

Additional Disclosure & Privacy Policy     Index Definitions & List of Holdings

Seeking-Alpha-Logo.png

The Easy Way To Invest In Real Estate