Homebuilders And REITs Rally As Treasury Yields Retreat

Real Estate Weekly Review
The rollercoaster ride continued for real estate sectors this week, as interest rates continue to dictate the performance of the REIT and homebuilding sectors. After dipping more than 3% last week, the REIT ETFs (VNQ and IYR) rallied more than 2% as the 10-year yield plunged back below the 3.0% level. The seemingly relentless rise in oil prices abated this week as US production continues to surge, prompting OPEC to consider raising their production targets in an effort maintain market share. Crude oil (USO) dipped more than 5% this week, pulling down global interest rates and powering the yield-sensitive sectors higher. Despite booming US production, oil prices are still up more than 35% YoY.

(Hoya Capital Real Estate, Performance as of 2pm Friday)
Yield-sensitive and retail REIT sectors were the outperformers on the week, led by strong performance at QTS (QTS), Spirit (SRC), Brixmor (BRX), CBL (CBL), and Omega (OHI). National Storage (NSA), DDR (DDR), Macerich (MAC), Invitation Homes (INVH), and Physicians Realty (DOC) were the only REITs in negative territory this week.
Homebuilders (XHB) recovered to finish higher by 3% after a mid-week dip following disappointing earnings from Toll Brothers (TOL). The high-end homebuilder sees strong order volume, particularly in the west, but shrinking margins from higher construction costs. In other areas of the real estate sector, mortgage REITs (REM) finished the week higher by 4% while... Read more