Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Transfer Of Power • REITs Lead • Housing Stays Hot

Summary

  • U.S. equity markets climbed to record-highs Wednesday on the first-day of the Biden Administration amid a strong start to corporate earnings season while housing data continues to show robust strength.

  • Following gains of 0.8% yesterday, the S&P 500 finished higher by 1.4% today while the Dow Jones Industrial Average gained 258 points and the tech-heavy Nasdaq 100 jumped 2.3%.

  • Real estate equities led the gains today as the broad-based Equity REIT ETF finished higher by 1.9% today with 17 of 19 property sectors in positive territory.

  • Homebuilders led the way today on solid homebuilder sentiment and mortgage market data and on predictions that the Biden Administration's policies will be particularly supportive for homeownership and new home construction.

  • Prison REIT Geo Group (GEO) dipped after the federal government decided not to renew a lease on a correctional facility in Pennsylvania, underscoring a highly uncertain future for private prisons.

Real Estate Daily Recap

U.S. equity markets climbed to record-highs Wednesday on the first day of the incoming Biden Administration amid a strong start to corporate earnings season while housing market data continues to show robust strength. Following gains of 0.8% yesterday, the S&P 500 ETF (SPY) finished higher by 1.4% today while the Dow Jones Industrial Average (DIA) gained 258 points and the tech-heavy Nasdaq 100 (QQQ) jumped 2.3%. Real estate equities led the gains today as the broad-based Equity REIT ETF (VNQ) finished higher by 1.9% today with 17 of 19 property sectors in positive territory while the Mortgage REIT ETF (REM) finished higher by 1.2%.

Ten of the eleven GICS equity sectors finished higher on the day, led to the upside by the Communications (XLC) and Technology (XLK) sectors on a post-earnings surge from Netflix (NFLX). Thus far, nearly 90% of S&P 500 companies have reported better-than-expected earnings according to data from FactSet. Homebuilders led the Hoya Capital Housing Index to another day of strong gains on solid homebuilder sentiment and mortgage market data and on positive sentiment that the Biden Administration's policies will be particularly supportive for first-time homeownership and new home construction.

This morning, the NAHB reported that its Homebuilder Sentiment Index - a leading indicator of housing activity - remained strong with a reading of 83 in January, the fourth-strongest month on record. Just as the housing industry was a primary beneficiary of the initial round of fiscal stimulus, we believe that a fresh round of relief will provide added support to shore up some of the less robust sub-segments of the housing market, particularly the Class B and C urban apartment markets which have seen an uptick in unpaid rents in recent months amid the "third wave" of economic shutdowns in several coastal cities.

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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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