REITs Climb In Risk-Off Rally As Yields Flirt With 18-Month Lows

Real Estate Weekly Review

Following the worst week of 2019 for the major equity indexes, the S&P 500 (SPY) finished the week lower by another 0.7% as trade talks have reportedly broken down between the US and China. Progress on North American trade relations and a delay of the European auto tariffs were welcome news for investors, who have flocked to bonds and domestic-focused equity sectors in recent weeks, taking the 10-year yield down near 18-month lows. REITs (VNQ and IYR) continue to be among the stronger-performing equity sectors of 2019, climbing more than 1% this week led by the more yield-sensitive segments of the real estate sector.

On the week, the Hoya Capital US Housing Index, an index that tracks the performance of the broader US housing industry, declined 0.4% after closing at new 2019 highs earlier this month as housing data continues to point to a solid recovery this year. The exclusively-domestic Residential REITs (REZ) and Homebuilders (ITB) were the relative outperformers, but trade tensions continue to weigh on the sectors more reliant on imported goods: Homebuilding Products and Home Furnishings. Zillow (Z) jumped more than 12% on the week, continuing its post-earnings momentum while Progressive (PGR), HCP (HCP), Ventas (VTR), and Mid-America Apartment (MAA) each delivered strong weeks in the housing sector as well.

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