Jan. 10, 2014, 2:44 PM
- The broad averages are struggling following the jobs number, but the big decline in interest rates (the 10-year Treasury is now off 10 bps to 2.87%) has the equity REIT sector lit up bright green.
- Ventas (VTR +4.4%) is having the biggest day, continuing to cruise through a couple of early-year downgrades (latest was Barclays on Wednesday). Among those also higher: National Retail Properties (NNN +3.1%), Realty Income (O +1.6%), Health Care REIT (HCN +2.5%), HCP (HCP +3.8%), RAIT Finanical (RAS +1.4%), Apartment Investment (AIV +2.9%), General Growth (GGP +1.6%), Inland Real Estate (IRC +1.5%), Government Properties (GOV +1.6%), American Campus (ACC +1.7%).
- Relevant ETFs: IYR, VNQ, REM, DRN, REZ, URE, SRS, RWR, ICF, SCHH, DRV, ROOF, KBWY, RTL, REK, FRI, FTY, PSR, FNIO, WREI
Dec. 31, 2013, 10:43 AM
- The morphing of equity REITs from a niche to a widely accepted and favored asset class has diminished the likelihood of outsized performance going forward, writes Morningstar's Samuel Lee. For decades, REIT yields averaged in the area of 7%, but a "regime shift" about 10 years ago has settled them down closer to 4%.
- Further, another benefit of REITs - their lack of correlation with the broader market - has disappeared, says Lee, with their average market beta of 0.5 moving to more than one in the early 2000s, and staying there ever since.
- "Anyone who buys REITs on historical risk/return characteristics without considering the fundamental drivers of return and potential changes to market structure is being reckless. A deeper look strongly suggests that REITs' diversification powers are down and so are their expected returns."
- Lee has two suggestions for those looking for an inflation hedge: Cash - the Fed typically raises short-term rates inline with increases in inflation - and conventional equities.
- Related ETFs: IYR, VNQ, REM, DRN, REZ, URE, SRS, RWR, ICF, SCHH, DRV, ROOF, KBWY, RTL, REK, FRI, FTY, PSR, FNIO, WREI
Nov. 20, 2013, 10:13 AM
- Existing home sales of a seasonally adjusted 5.12M fell 3.2% in October (roughly inline), but are 6% higher than a year ago. The national median existing home price of $199,500 is up 12.8% from a year ago. Distressed sales accounted for 14% of total sales vs. 25% a year ago.
- Total inventory fell 1.8% Y/Y to 2.13M homes, a 5-month supply vs. 5.2 months last year. The median time on the market of 54 days is up from 50 in September and down from 71 in October 2012.
- Larry Yun: "The erosion in buying power is dampening home sales ... Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.”
- Full report
- Homebuilder and Residential REIT ETFs: XHB, ITB, REZ, RTL, PKB
Oct. 9, 2013, 3:11 PM
- "There was a time when people were overly exuberant about how long interest rates were going to stay low. That time is gone," says Cohen & Steers' Jason Yablon. Investors have pulled $728M out of real-estate mutual funds since May 15 (about the time interest rates started rising) vs. $42.8B in inflows into all equity funds, according to Lipper data. After outperforming the broader stock market for several years, REIT stocks have underperformed the S&P 500 for each of the last four months.
- The best-performing REITs in Q3, say analysts, were those renting property with short-term leases. Those with longer-term leases - such as owners of health care facilities - suffer most as rates rise.
- The only sectors showing gains in Q3 were self-storage (+7.45%) and hotel (+6.23%) REITs. "Self-storage was always regarded as the ugly stepchild of the real-estate industry, but our industry was always thought to be recession-resilient," says Extra Space Storage (EXR) CEO Spencer Kirk.
- REIT ETFs: FRI, WREI, FTY, ICF, IYR, REM, REZ, RTL, PSR, KBWY, SCHH, RWR, VNQ, DRN, URE, DRV, SRS, REK, ROOF.
- Self-storage: CUBE, PSA, SSS.
- Hotel: AHT, CLDT, CHSP, DRH, FCH, HT, HPT, HST, LHO, PEB, RLJ, BEE, INN, SHO, SPPR.
Oct. 7, 2013, 3:26 PM
- "I am going to go on the record," says Halcyon Asset Management chairman John Bader, speaking at the WSJ's Heard on the Street conference. "Japan is an accident waiting to happen ... I don't think this is today's or tomorrow's business, but I think in 10 years this blows up big time ... you can't operate with a debt to equity level like that."
- Turning domestically, Bader - viewing a stock market "gone to the moon," the end of the 30-year bond bull market, and high yield "priced to perfection," - sees a lot of risks right now. He's positioned to make money be shorting REIT indexes and other similar instruments.
- Japan-related ETFs: EWJ, NKY, EWV, EZJ, ITF, JSC, JPP, DXJ, SCJ, DFJ, FJP, JPNL, JPNS, DXJS, JGBT, JGBL, JGBS, JGBD, FXY, JYN, YCL, YCS.
- REIT ETFs: FRI, WREI, FTY, ICF, IYR, REM, REZ, RTL, PSR, KBWY, SCHH, RWR, VNQ, DRN, URE, DRV, SRS, REK, ROOF.
Sep. 26, 2013, 3:52 PM
- REITs may look enticing after their big selloff this summer, but leave them on the bench for now, says Ranger International's Jeff Middleswart. He notes the FTSE NAREIT Index had nearly a 1-to-1 correlation with the S&P 500 over the last 2 years (far higher than that of MLPs or utilities) - not great for investors looking for assets uncorrelated to the market. Now - with rates rising - REITs are behaving more like bonds thanks to their history of meager dividend growth.
Sep. 18, 2013, 8:51 AM
- In addition to the light headline print for August (891K vs. 918K expected), July's figure is revised lower by 13K to 883K. Stripping out the volatile multi-family number finds single-family starts of 628K up 7% from July (the overall print gained just 0.9%).
- Building permits of 918K were 3.8% below July, and 11% higher Y/Y.
- Housing ETFs: XHB, ITB, PKB, REZ.
- Full report.
Sep. 17, 2013, 8:29 AM
- What gives? New home contracts fell sharply in July, but those for existing homes barely budged. The WSJ's Nick Timiraos has some ideas:
- First, builders have been more aggressive in raising prices.
- Second, builders are more reliant on mortgage-dependent buyers, while the resale market has seen a surge in all-cash purchases.
- Third, some hustled to close on a purchase before rates rose, but you can't buy a home where construction isn't yet complete. So to the extent higher rates pull forward demand, it's likely to be seen in the resale market, not in new homes.
- XHB, ITB, PKB, REZ.
Sep. 11, 2013, 3:50 PM
- U.S. REITs had a tough August, falling 6.23% on a total return basis, according to NAREIT. The YTD return has now gone slightly negative. This compares to the S&P 500 off 2.9% in August and up 16.15% YTD.
- Not all sectors are down though. Lodging/Resorts leads, gaining 10.85% YTD. Self-Storage, Manufactured Homes, and Timber (CUT, WOOD) have also gained.
- Leading on the downside are mortgage REITs (MORT), off 5.59% YTD. Apartments and Retail are also posting losses YTD.
- REIT ETFs: FRI, WREI, FTY, ICF, IYR, REM, REZ, RTL, PSR, KBWY, SCHH, RWR, VNQ, DRN, URE, DRV, SRS, REK, ROOF, REZ, MORL.
Sep. 10, 2013, 1:19 PM
- Income fans can get in on big profits rolling into Hollywood from franchise films with EPR Properties (EPR -1.1%), writes Jack Hough in Barron's. The REIT derives more than half of its income from multiplex theaters - it yields 6.5% and payouts are likely to increase in coming years, says Hough.
- Not your standard office or retail rental REIT, EPR owns charter schools, ski resorts, and water parks, in addition to theaters. New leases typically have investment yields over 9%, occupancy is (currently) 98%, and almost all leases are triple-net.
- The shares trade at about 13x this year's expected FFO vs. 16x for net lease REITs, and the dividend yield of 6.5% is more than 100 bps higher than the group average.
- Earlier: Janney starts coverage on a number of equity REITs, EPR not among them.
- ETFs of interest: FRI, WREI, FTY, ICF, IYR, REZ, RTL, PSR, KBWY, SCHH, RWR, VNQ, DRN, URE, DRV, SRS, REK, ROOF.
Sep. 10, 2013, 10:32 AM
- On it's own the NAR's Housing Affordability Index is pretty useless - it hasn't dropped below the 100 level signaling unaffordability since Bill Clinton was president. But researchers from Robert Morris University suggest the index can detect a housing bubble if it slips below its long-term trend line for at least three months.
- And that's just what it's done of late, falling below the long-term trend in April and staying there through July (July figures were reported yesterday). This doesn't mean prices are set to crash - by RMU's read, housing went into a bubble in 2004, but prices didn't peak until two years later - but the data might be another push to a Fed considering tighter monetary policy.
- Homebuilders ETFs: XHB, ITB, PKB, REZ.
Aug. 23, 2013, 11:09 AM
- BMO Capital upgrades to Buy with $175 price target.
- The stock's off about 17% since late May with current annualized yield of 3.11%.
- Peers Taubman (TCO +0.5%), General Growth Properties (GGP +0.8%), Macerich (MAC +0.1%), and CBL (CBL -1.1%) have had similarly tough runs.
- ETFs of interest: FRI, WREI, FTY, ICF, IYR, REM, REZ, RTL, PSR, KBWY, SCHH, RWR, VNQ, DRN, URE, DRV, SRS, REK, ROOF.
Aug. 16, 2013, 12:48 PM
- Struggling home builders are jumping ahead on respectable but in-line housing data, as at least overall construction has climbed in two of the past three months.
- "Looking at the underlying trend in one-family starts suggests that the pace of groundbreaking activity is actually fairly steady," an RBS economist says, unconcerned about July's drop in single-family starts since "anecdotal evidence suggests builders may be holding back on new construction in part to reap the benefits of higher prices."
- Raymond James "continue[s] to believe we are in the early stages of a sustainable up-cycle in U.S. housing," and favors Toll Brothers (TOL +1.5%), which it sees as less sensitive to mortgage rates.
- PHM +3.4%, LEN +3.1%, KBH +2.9%.
- ETFs: XHB, ITB, PKB, REZ.
Jul. 22, 2013, 2:58 PM
Homebuilders (ITB -1.4%) tumble across the board after existing June home sales slipped a seasonally adjusted 1.2%. Rising mortgage rates were supposed to boost short-term demand as potential buyers aimed to lock in mortgages before rates went even higher, but the June report showed no sign of it. KBH -2.6%, RYL -2.5%, MTH -2.5%, DHI -2.2%, MDC -2.2%, HOV -2%, LEN -2%, PHM -1.6%, TOL -1.4%.| Jul. 22, 2013, 2:58 PM | 3 Comments
Jul. 22, 2013, 9:25 AM
"The frenzy has concluded," says Jim Klinge (aka Jim the Realtor), as higher mortgage rates push marginal home buyers to the sidelines. "The pool of crazy buyers - those willing to pay higher prices because they're tired of losing bidding wars - has diminished considerably."| Jul. 22, 2013, 9:25 AM | 3 Comments
Jul. 15, 2013, 3:59 PMLit up bright red on an otherwise quiet day are the homebuilders (XHB -1%). Lennar's (LEN -4.1%) big move puts it down 8% YTD as the benign interest rate scenario of the past many months/years becomes less so. Others: Pulte (PHM -3.3%), Toll (TOL -2.2%), Ryland (RYL -2.6%), D.R. Horton (DHI -4.6%). | Jul. 15, 2013, 3:59 PM | 5 Comments
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