Rally Continues As Housing Data Is In Focus

Jan. 19, 2019 1:48 AM ETCLGX, FREL, FRI, FSHOX, ICF, ITB, IYR, NAIL, O, PLD, PPG, PPTY, RDFN, REM, REZ, RF, RMAX, RWR, SCHH, SPY, STI, VNQ, XHB, XLRE2 Comments

Summary

  • What shutdown? The rally continued for US equities as the major indices notched their fourth straight week of gains. The S&P 500 has jumped 14% since bottoming in December.
  • Real estate and housing-related equities continue to lead the rally in 2019. REITs are up more than 6% this year, while the Housing Industry Index is up nearly 9%.
  • Housing starts and new home sales data continues to be delayed by the shutdown. Indications are that single-family home sales significantly weakened in the final quarter of 2018.
  • After a dismal end to 2018, housing data is showing signs of life. The MBA Purchase Index, a leading indicator of home sales, climbed to the highest level since 2010.
  • Corroborating the sensitivity of single-family housing demand to mortgage rates, homebuilder sentiment improved in December despite volatile financial markets. Rates, however, remain at the upper-end of the post-recession range.

Real Estate Weekly Review

real estate investing

As the longest government shutdown in history enters its fifth week, investors don't seem to mind. The rally continued for US equities, climbing for the fourth consecutive week. The S&P 500 (SPY) notched another 3% gain this week and is now higher by nearly 14% from the lows hit as the market entered a bear market on December 24. This week's gains came amid potential signs of easing in the China/US trade dispute after US officials indicated that some tariffs may be lifted during trade talks. Earnings season so far as been generally in line or slightly better than expectations with the earnings calendar ramping up over the next three weeks.

Real estate and housing-related equities continue to lead the rally in 2019. Following a nearly 5% gain last week, REITs (VNQ and IYR) climbed another 2% on the week, led by strong performance from the residential REIT sector. With REIT earnings season beginning next week, the apartment and single-family rental REIT sub-sectors both notched gains in excess of 3% on the week.

(Hoya Capital Real Estate, Performance as of 4pm Friday)

The Hoya Capital Housing Index, an index that tracks the performance of the US housing industry, finished the week higher by nearly 2% despite weakness from the Homebuilders (XHB and ITB) and home improvement retailers. The mortgage lending and services sector jumped more than 5% on the week after strong results from regional banks including SunTrust (STI) and Regions Financial (RF). Mortgage REITs (REM) climbed 1% on the week.

The homebuilding products and materials sector managed to finish the week higher despite a warning from paint and coatings maker PPG (PPG) that the firm is under federal investigation for the improper accounting practices originally disclosed last May. The real estate brokerage and technology sector

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