• Alex Pettee, CFA

Stimulus Signed • Dividend Boost • REIT Earnings

Summary

  • U.S. equity markets climbed to record highs Thursday as interest rates were held in-check by weakness in European economies even as President Biden signed an additional $1.9 trillion stimulus into law.

  • Closing at fresh record-highs, the S&P 500 finished higher by 1.0% while the tech-heavy Nasdaq 100 rallied 2.5% after dipping into "correction territory" earlier this week.

  • Real estate equities were broadly higher today- led by technology and housing REITs- as the broad-based Equity REIT ETFs gained 1.2% with 13-of-19 property sectors in positive territory.

  • Mall REIT Seritage Growth (SRG) finished lower after reporting that its NOI plunged by 48% in 2020. Manufactured housing REIT UMH Properties (UMH) reported a strong quarter with NOI growth of 15% in full-year 2020.

  • Mortgage REITs continued their strong week after Redwood Trust (RWT) boosted its dividend by 14% to $0.16 per share. Ready Capital (RC) rounds-out mREIT earnings season this afternoon.

Real Estate Daily Recap

U.S. equity markets climbed to record highs Thursday as interest rates were held in-check by relative weakness in European economies even as President Biden signed an additional $1.9 trillion stimulus package into law. Closing at fresh record-highs, the S&P 500 ETF (SPY) finished higher by 1.0% while the tech-heavy Nasdaq 100 (QQQ) rallied 2.5% after dipping into "correction territory" earlier this week. Real estate equities were broadly higher - led by technology and housing REITs - as the broad-based Equity REIT ETFs (VNQ) finished higher by 1.2% with 13-of-19 property sectors in positive territory while the Mortgage REIT ETFs (REM) gained 0.6%.

The fresh record-highs come exactly one year after the WHO officially classified the COVID-19 outbreak as a "pandemic" and while the U.S. economy appears poised to full-recover lost output this year, international economies are likely to see a slower recovery. Ongoing issues with the vaccine rollout in the European Union put downward pressure on the 10-Year Treasury Yield (IEF) after jumping above 1.60% earlier in the week. Eight of the eleven GICS equity sectors finished higher today, led to the upside by the Technology (XLK) and Communications (XLC) while another strong day from the PropTech firms Zillow (Z) and Redfin (RDFN) powered the Hoya Capital Housing Index to fresh records as well.

Commercial Equity REITs

Today we published Shopping Center REITs: Too Far, Too Fast? Shopping Center REITs have continued their post-vaccine resurgence into early 2021, surging another 30% this year and pushing stock prices back near pre-pandemic levels. Shopping center REITs fared far better than their enclosed mall peers but still reported an average FFO/share decline of nearly 20% in 2020 while same-store NOI dipped over 10%. It's too soon to declare victory, however. WWII-levels of fiscal stimulus powered retail sales to record highs in 2020, but while the "big boxes" are thriving, service-oriented "small-shop" retailers were annihilated by lockdowns. Valuations currently appear extended as REITs that provided guidance see only modest growth in 2021.

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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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