What to watch for in real estate next week

10 year bond yield - LTEnlarge GraphThe week ahead

Earnings season is pretty much over. Only five companies will report next week; nobody related to real estate is reporting.

Next week is not all that heavy data-wise, although we will get the S&P Case-Schiller Home Price Index and Pending Home Sales. The Case-Schiller data will be from March, which should begin the seasonally strong period.

Schedule of upcoming economic releases

Tuesday 5/28

  • Case-Schiller Home Price Index
  • Richmond Fed Manufacturing Index
  • Consumer Confidence
  • Dallas Fed Manufacturing Activity

Wednesday 5/29

Thursday 5/30

  • Initial Jobless Claims
  • Bloomberg Consumer Comfort
  • Second Revision to Q1 GDP
  • Pending Home Sales

Friday 5/31

  • Personal Income
  • Personal Spending
  • PCE Deflator
  • National Association of Purchasing Managers Index
  • University of Michigan Consumer Confidence

Schedule of Upcoming Earnings Releases

  • None

Implications for mortgage REITs

The recent sell-off in the bond market has been negatively affecting the mortgage REIT space as the mortgage REITs have underperformed the S&P 500 by a sizable amount. Annaly (NLY) is down 9% since May 1st, American Capital (AGNC) is down 17%, and even adjustable rate REIT Hatteras (HTS) is down 6%, while the S&P 500 is up 4.2% for the month. In a rapidly rising interest rate environment, REITs that invest in adjustable rate mortgages should outperform those that invest in 30-year fixed rate mortgages.

Implications for home builders

The last home builder to report was Toll Brothers (TOL), who reported good earnings. The Homebuilder ETF (XHB) has slightly outperformed the S&P 500. Increasing home prices are generally good for home builders, so people will focus on the Case-Schiller numbers on Tuesday and also Pending Home Sales on Thursday.