Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Veto Threat • Dividend Resumption • REIT Acquisitions

Summary

  • U.S. equity markets drifted higher Wednesday as vaccine-driven optimism offset lukewarm economic data and concerns over a potential Presidential veto of the long-awaited coronavirus stimulus bill.

  • Snapping a three-day losing streak, the S&P 500 finished higher by 0.1% today but the tech-heavy Nasdaq 100 finished off by 0.5%. The Dow Jones Industrial Average gained 114 points.

  • After leading the way yesterday, real estate equities were among the laggards today as the broad-based Equity REIT ETF finished lower by 0.7% with 13 of 18 property sectors in positive-territory.

  • New Home Sales data came-in shy of estimates driven by a mounting inventory shortage while mortgage application data suggested that the recent record-setting demand for housing is set to continue into early 2021.

  • Mortgage REIT AG Mortgage Investment (MITT) was among the leaders today after it reinstated its dividend. There are now just three mREITs that still have their common share dividends suspended. 32 of the 41 mREITs will have paid lower dividends in 2020 than in the prior year.

Real Estate Daily Recap

U.S. equity markets drifted higher Wednesday as vaccine-driven optimism offset lukewarm economic data and concerns over a potential Presidential veto of the long-awaited coronavirus stimulus bill. Snapping a three-day losing streak, the S&P 500 ETF (SPY) finished higher by 0.1% today but the tech-heavy Nasdaq 100 (QQQ) finished off by 0.5%. The Dow Jones Industrial Average (DIA) gained 114 points. After leading the way yesterday, real estate equities were among the laggards today as the broad-based Equity REIT ETF (VNQ) finished lower by 0.7% with 13 of 18 property sectors in negative territory. The Mortgage REIT ETF (REM), however, jumped 2.3% on the day.

The "reopening trade" continued today as Mid-Caps (MDY) gained 0.9% while Small-Caps (SLY) were higher by 1.1%, each eclipsing fresh record highs today. 8 of the 11 GICS equity sectors finished in positive territory today, led by the Energy (XLE), Financials (XLF), and Communications (XLC) sectors. Homebuilders dragged on the Hoya Capital Housing Index as New Home Sales data this morning came-up shy of estimates driven by a mounting inventory shortage while mortgage application data suggested that the recent record-setting demand for housing is set to continue into early 2021.

As discussed yesterday, one of the emerging constraints on the further upside for New and Existing Home Sales is the simple lack of homes available to sell. Following a downside miss on Existing Home Sales yesterday, New Home Sales data today missed estimates at 841k, which was still 20.8% above last year's rate. Inventory levels remain near record-lows as the month's supply of new homes is lower by more than 11% from last year. Demand remains red-hot, however, as mortgage applications to purchase a single-family home - a forward-looking indicator of home sales - are now higher by 26% from last year while refinancing applications are now higher by 124% from last year.

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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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