The REIT ETF indexes (VNQ and IYR finished the week higher by 1.4%, on strength in the student housing, storage, and hotel sectors. The S&P 500 (NYSEARCA:SPY) declined 0.2%. The homebuilder ETFs (XHB and ITB) were higher by 1.2% on the week. The commercial construction ETF (NYSEARCA:PKB) declined 1.9%.
(Hoya Capital Real Estate, Performance as of 12pm Friday)
Across other areas of the real estate sector, mortgage REITs (NYSEARCA:REM) finished the week higher by 0.3% and the international real estate ETF (NASDAQ:VNQI) gained 0.4%. The 10-Year Treasury yield (NYSEARCA:IEF) fell 8 basis points on the week. Interest rates are back near six month lows amid uncertainty over the pro-growth legislative agenda of the Trump administration. The 10-year yield is down 20bps since the start of the year.
REITs are now lower by 0.1% YTD on a price-basis and higher by rough 2% on a total-return basis. The sector divergences are also quite significant: the Data Center sector has surged 17% while the retail-focused REITs have fallen double-digits. REITs ended 2016 with a total return of roughly 9%, lower than its 20-year average annual return of 12%.
Last week, we published our quarterly “REIT Earnings Report Card” where we discussed that Q1 earnings were generally better-than-expected across the real estate sector. Roughly 45% of REITs exceeded consensus expectations, while 40% met, and just 15% missed. 35% of REITs boosted 2017 guidance while just 10% lowered guidance. Below is the sector performance since the beginning of earnings season.
Every week, we like to dive deeper into the economic data that directly impacts real estate.
(Hoya Capital Real Estate, HousingWire)
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