Key releases for real estate investors in the last week of 2014 (Part 2 of 6)
Last week’s highlights for mortgage REITs
Last week had the Christmas holiday, which meant markets were illiquid and subject to big moves. The third quarter GDP number came in at +5.0%, which was a big surprise to the upside. Stocks soared on the number, and bonds sold off after hitting multi-quarter lows the previous week. Ironically, worldwide economies are stalling, which means the US could be importing deflation again. Mortgage REITs like Annaly (NLY) probably will not have to worry about increased funding costs for a while, as global economic weakness can give the Fed an excuse to stand pat.
Commercial REITs focus on strength in the labor market
Commercial retail REITs such as Simon Property Group (SPG) and General Growth Properties (GGP) focused most on the consumer sentiment data like the University of Michigan Index and the Bloomberg Consumer Comfort Index. Falling energy prices, particularly gasoline, have been driving better consumer confidence numbers.
Office REITs such as Vornado Realty Trust (VNO) and Boston Properties Inc. (BXP) took comfort in the strong GDP data.
The homebuilding sector is entering its seasonal slow period
For the builders, the focus was existing home sales, which came in disappointing. Existing homes compete with new construction. The spring selling season begins in February and gets into full gear in March and April.
For builders, the key will be the Millennials and their employment situation. Since the real estate bust, Millennials have been caught in a vice of tight credit, tight housing supply, and a lousy job market. It appears that the 20-something demographic is beginning to have some success in the job market, which bodes well for 2015. A combination of high rental inflation combined with low interest rates should push more young people from renting to buying.
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