• Alex Pettee, CFA

Mall Merger • Stimulus Checks • Home Prices Surge

Updated: Dec 29, 2020

Summary

  • U.S. equity markets retreated from record-highs Tuesday as Congress deliberates expanding the recently-approved stimulus measures on a relatively light day of trading volume and news flow.

  • Following gains of 0.9% yesterday, the S&P 500 finished lower by 0.2% today while the Dow Jones Industrial Average declined by 68 points. Small-Caps and Mid-Caps declined by more than 1%.

  • Real estate equities were mostly lower on the day as the broad-based Equity REIT ETF (VNQ) declined by 0.9% today with 18 of 19 property sectors in negative territory.

  • Simon Property (SPG) completed its acquisition of fellow high-productivity mall REIT Taubman Centers (TCO), concluding a drama-filled saga that saw a series of lawsuits, attempts to terminate, and a price reduction on the $3.4 billion transaction.

  • Home prices surged by the most since 2014 according to the Case Shiller National Index as record-low inventory levels clash with record-high levels of homebuying activity.

Real Estate Daily Recap

U.S. equity markets retreated from record-highs Tuesday as Congress deliberates expanding the recently-approved stimulus measures on a relatively light day of trading volume and news flow with just two trading days left in an unforgettable 2020. Following gains of 0.9% yesterday, the S&P 500 ETF (SPY) finished lower by 0.2% today while the Dow Jones Industrial Average (DIA) declined by 68 points. Real estate equities were mostly lower on the day as the broad-based Equity REIT ETF (VNQ) declined by 0.9% today with 18 of 19 property sectors in negative territory. The Mortgage REIT ETF (REM) retreated 1.3% on the day.

Nine of the eleven GICS equity sectors finished lower on the day dragged on the downside by the Commerical Real Estate (XLRE), Energy (XLI), and Industrials (XLI) sectors. After substantially outperforming their large-cap peers over the last two months, Small-Caps (SLY) and Mid-Caps (MDY) lagged for the second-straight day. Homebuilders, along with the broader Hoya Capital Housing Index pulled back modestly today despite another slate of strong housing data from Case Shiller and Redfin (RDFN), which reported that pending home sales surged 34% Y/Y while their Homebuyer Demand Index expanded 23% from pre-pandemic levels.

As we discussed today in Homebuilders: This Time Was Different, to the surprise of countless pundits and experts, the U.S. housing industry has assumed a very different role during this economic crisis, serving as the unexpected leader throughout the early recovery. Record-low inventory levels combined with robust levels of homebuying activity have put substantial upward pressure on home values since the start of the pandemic. All of the major home price indexes have exhibited a reacceleration in price appreciation over the last five months, underscored today by the 8.4% year-over-year increase in the Case Shiller National Home Price Index in October, which was the strongest rate of home price appreciation since March 2014.

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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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