A volatile third quarter for US equity markets came to a close with modest gains across the major averages. The S&P 500 (SPY) and Nasdaq (QQQ) each secured gains of roughly 1% for the quarter while the small-cap Russell 2000 (IWM) fell by 3%. Powered by the tailwinds of lower interest rates and a continuation of the 'Goldilocks' economic environment of low inflation and steady - but modest - economic growth, real estate and housing-related equities continue to lead this year's gains. The broad-based real estate ETFs (VNQ and IYR) gained roughly 7% on the quarter, led by the data center, manufactured housing, healthcare, and apartment REIT sectors. The mall and hotel REIT sectors were the lone real estate categories in negative territory for the quarter.

The Hoya Capital Housing Index, the benchmark that tracks the performance of the US housing industry, finished the quarter higher by roughly 7.5% with strong gains from the Homebuilders and Home Improvement Retail categories. As discussed in our recently weekly update, 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. ower mortgage rates have been largely behind the recent resurgence in the single-family markets. The 30-Year fixed mortgage remains more than 100 basis points lower on a year-over-year basis. Top individual performers in the housing sector over the last quarter included Restoration Hardware (RH), At Home Group (HOME), Meritage Homes (MTH). KB Homes (KBH), and MDC Holdings (MDC).

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.

With gains of 25% so far this year, the broad-based REIT ETFs (VNQ and IYR) continue to outperform the S&P 500, which has climbed roughly 19%. The US Housing sector has climbed roughly 28% this year led by the 53% surge in Homebuilders (ITB) and strong gains from the Home Furnishings and Homebuilding Products & Materials sectors. At 1.68%, the 10-year yield has retreated by 101 basis points since the start of the year and is roughly 155 basis points below peak levels of 2018 around 3.25%.

For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Student Housing, Single-Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Shopping Centers, Hotels, Office, Storage, Timber, and Real Estate Crowdfunding.

Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.