For Housing, A 'Perfect Month'

• 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.
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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.

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.

Real Estate Economic Calendar

The economic calendar this coming week is highlighted by employment and PMI data. While the consumer has shown signs of resilience, the US manufacturing and industrial sector has slowed more significantly over the last year following a strong reacceleration through 2018. Sometimes forgotten is that industrial and manufacturing production already had a significant contraction during this recovery between 2014 and 2016 before reaccelerating after the 2016 election and the tax reform package of 2017. Manufacturing PMI data is released on Tuesday, as is construction spending. ADP employment data is released on Wednesday while BLS data is released on Friday with expectations of around 145k in job growth.

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