Worst Week For REITs Of 2019 As REIT Rejuvenation Loses Steam

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• After surging out of the gate in the first quarter, the high-flying REIT sector trended sideways in the second quarter, finishing roughly flat despite the continued retreat in interest rates.
• The major benchmark equity indexes, meanwhile, delivered solid gains in the second quarter, adding 3-5% and pushing 2019 on the S&P 500 and Nasdaq to 17% and 20%, respectively.
• The broad REIT indexes finished the week lower by more than 3%, the worst week of 2019, weighed down by a 4% drop in the heavily-weighted cell tower REIT sub-sector.
• Pending Home Sales beat estimates as the positive effects of sharply lower mortgage rates are beginning to be felt. New Home Sales missed estimates in May following two strong months.
• Following several quarters of moderation, home price appreciation appears poised to accelerate into year-end. Apartment and single family rent growth has also picked up to the strongest rate since 2016.

Despite the continued retreat in interest rates, the REIT rejuvenation has lost steam over the last quarter. After surging more than 15% in the first quarter of this year, REITs have trended sideways over the past three months with the major REIT indexes finishing the week lower by roughly 3%. It was the worst week of the year for the Vanguard Real Estate ETF (VNQ), weighed down by the retail and cell tower REIT sectors.

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