For Housing, A 'Perfect Month'

Sep. 29, 2019 5:23 AM ETITB, IYR, KBH, QQQ, HOUS, RMAX, SCHH, SPY, USRT, VNQ, XHB, NAIL, HAUZ, XLRE, VNQI, REZ, NURE, REM, MORT, PKB, INDS, RTL-OLD1, NETL, PFFR, FRI, FREL, REET, REIT.IND, AMT, CCI, SBAC2 Comments

Summary

  • Political uncertainty weighed on US equity markets last week following the release of a whistleblower complaint alleging wrongdoing by the President. The S&P 500 finished lower for the second week.
  • Trade tensions between the US and China appeared to ratchet-up after reports that the Trump administration is considering restrictions on Chinese companies' access to US capital markets.
  • Lost in the political circus, following a trifecta of strong housing data last week, the streak continued with a blowout New Home Sales report and strong Pending Home Sales data.
  • In August, New Home Sales surged 18% from last year, the third consecutive month seeing growth above 9%. June's revised data was the strongest rate of sales in 12 years.
  • August's housing data completed the "perfect month" with better-than-expected results on Housing Starts, Building Permits, Homebuilder Sentiment, and New, Existing, and Pending Home Sales.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »

Real Estate Weekly Outlook

400 days until Election Day 2020. Political uncertainty weighed on US equity markets last week following the release of a whistleblower complaint alleging wrongdoing by the President as both sides of the aisle dug into their respective trenches. The S&P 500 (SPY) finished lower for the second straight week, declining by 0.6% while the tech-heavy Nasdaq (QQQ) finished off by 2.0% as trade tensions between the US and China appeared to ratchet-up after reports that the Trump administration is considering restrictions on Chinese companies' access to US capital markets. Somewhat lost in the political circus, economic data over the past several weeks has been fairly solid with US housing markets completing the "perfect month" in August, beating expectations on all six of the major housing data points.

real estate ETF

Helping to boost the more yield-sensitive equity market sectors, the 10-Year Treasury yield resumed its retreat, dipping back below 1.70% after briefly perking higher mid-month. Outside of the heavily-weighted cell tower sector, the real estate sector generally delivered another solid week as the broad-based REIT ETFs that exclude cell towers (SCHH and USRT) finished the week modestly higher while the REIT ETFs with heavy cell tower REIT exposure (VNQ and IYR) finished lower on the week. Eleven of the 15 major real estate sectors finished in positive territory on the week, led by the data center, shopping center, healthcare, and student housing REIT sectors.

REIT ETF

The Hoya Capital US Housing Index, the benchmark that tracks the performance of the US Housing Industry, climbed higher on the week as the strong month for single-family housing data continued with a blowout New Home Sales report and strong Pending Home Sales data. Lower mortgage rates have been largely behind the recent resurgence in the single-family markets. The 30-Year fixed mortgage remains more than 100 basis

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Disclosure: I am/we are long VNQ, RLGY, RMAX, WHR, WSM, AAN, WFC, KBH, LZB, TREX, HOME. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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