Vaccine Deliveries | Record November | Housing Shortage

Summary

• U.S. equity markets retreated Monday on the final day of a historically strong November, a month that saw investors rotate back into pandemic-sensitive equity sectors following progress on vaccine development.
• Ending the month with gains of 11.1%, the S&P 500 retreated by 0.4% today while the Dow Jones Industrial Average dipped 272 points but finished the month higher by 12.1%.
• Closing out the month with gains of 9.6%, the broad-based Equity REIT ETFs declined by 1.2% today. Mortgage REITs retreated by 2.9% today but finished the month higher by 18.2%.
• Consistent with the themes of the prior three Monday mornings, investors woke up to positive vaccine news with Moderna (MRNA) announcing that it would file for authorization for its promising vaccine while Pfizer (PFE) has begun to deliver vaccines to distributors.
• Following two weeks of stellar housing data, record-low inventory levels and rising home values may be starting to emerge as constraints for potential homebuyers, but present opportunities for Single-Family Rental REITs.

Real Estate Daily Recap

U.S. equity markets retreated Monday on the final day of a historically strong November, a month that saw investors rotate back into pandemic-sensitive equity sectors following a series of advancements in vaccine development. Ending the month with gains of 11.1%, the S&P 500 ETF (SPY) retreated by 0.4% today while the Dow Jones Industrial Average (DIA) dipped 272 points but finished the month higher by 12.1%. Closing out the month with gains of 9.6%, the Equity REIT ETF (VNQ) declined by 1.2% today with 15 of 18 property sectors in negative territory. Mortgage REITs (REM) finished lower by 2.9% today but finished the month with gains of 18.2%.

As discussed in our Real Estate Weekly Outlook, one of the themes of November's equity market rebound has been the revival of the Mid-Caps (MDY) and Small-Caps (SLY), which surged 14.3% and 18.6%, respectively, over the past month. Consistent with the themes of the prior three Monday mornings, investors woke up to positive vaccine news with Moderna (MRNA) announcing that it would file for authorization for its promising vaccine while Pfizer (PFE) has begun to deliver vaccines to distributors. Despite these developments, the leaders of November were generally among the laggards today as 9 of the 11 GICS equity sectors finished in negative territory today while homebuilders and the Hoya Capital Housing Index also pulled back.

Following two weeks of stellar housing data, record-low inventory levels and rising home prices may be starting to emerge as constraints for potential homebuyers according to Pending Home Sales data released by the National Association of Realtors this morning. Pending Sales pulled back 1.1% in October but remained higher by 20.2% from last year. Earlier this month, the NAR reported that inventory of existing homes dipped 19.8% from last year, representing a 2.5-month supply at the current sales pace, the lowest in the survey's history. Record-low inventory levels and insatiable demand have sparked a reacceleration in home values. Home values jumped 7.0% annually in September according to the S&P CoreLogic U.S. National Home Price Index released this week, which was the highest annual gain since May 2014.

Employment data highlights this week's economic calendar, headlined by ADP Employment data on Wednesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday. Economists are looking for employment gains of roughly 500k in October following last month's gain of 638k and for the unemployment rate to tick down to 6.7%. We'll also see Construction Spending data on Tuesday, the weekly MBA Mortgage Application data on Wednesday, and a flurry of PMI data throughout the week.

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Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.