Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Upside-Down Week As REITs Stumble And Yields Surge

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  • Signs of cooling trade tensions between the US and China sent US equity markets to their third straight weekly gain, edging closer to new all-time record highs.

  • The 10-Year yield surged 35 basis points this week, the largest one-week jump since 2013. Yield-sensitive sectors including REITs, which have led this year’s rally, took a step back.

  • Housing stocks set a series of new record highs throughout the week, jumping another 2%, led by the Home Furnishings, Mortgage Banking, and Real Estate Technology sectors.

  • While lower oil and food prices continue to put downward pressure on the headline inflation data, core inflation has perked up over the last three months.

  • Retail sales came in stronger-than-expected, but largely due to strength in the e-commerce sector. Brick & Mortar retailers continue to struggle with store closings and slowing sales growth.

The S&P 500 (SPY) and Dow Jones Industrial Average (DIA) each climbed another 1% this week, pushing the major large-cap benchmarks back to within 1% of all-time record highs. The small-cap Russell 2000 (IWM), which has underperformed for most of this year, surged nearly 5% on the week while on the flip-side of the coin, the high-flying REIT sector took a step back as the broad-based REIT ETFs (VNQ and IYR) dipped more than 2%.

With equity markets flirting new all-time highs, the Federal Reserve is expected to walk a tight-rope in this week’s upcoming meeting, where the committee is widely expected to cut interest rates by a quarter-point. Expectations of easing monetary policy have been a key factor in the stabilization in key economic sectors this year and have been the driving force behind the reacceleration in the single-family housing markets. Speaking of the housing markets, it’s a huge week for housing data with Homebuilder Sentiment released on Tuesday, Starts and Permits data released on Wednesday, and Existing Home Sales released on Thursday.

For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Student Housing, Single-Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Shopping Centers, Hotels, Office, Storage, Timber, and Real Estate Crowdfunding.

Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. 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 the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.

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Hoya Capital Real Estate, LLC

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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. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and other important disclosures and definitions are available by clicking the links below.

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