Last week’s highlights for mortgage REITs
The Employment Situation Report last week was the highlight for mortgage real estate investment trusts (or REITs) and real estate investors. Bonds sold off on what was a pretty strong payroll number. That said, the household survey showed employment as flat, which is a bit of a conundrum. Bonds sold off on the report, which also showed a small bump in wages that is going to drive the Fed’s decision to raise interest rates. Mortgage REITs such as Annaly Capital (NLY) will be sensitive to impending rate hikes.
Commercial REITs focus on strength in the labor market
Commercial retail REITs such as Simon Property Group (SPG) and General Growth Properties (GGP) concentrated on the Bloomberg Consumer Comfort Index, which shows that consumers are feeling better about their personal financial situations. Hopefully, this improved sentiment will translate into good holiday numbers. Some of the retailers also began announcing their third-quarter numbers.
The homebuilding sector entering its seasonal slow period
Homebuilders did not have much to chew on last week, with the exception of the strong consumer confidence numbers. The builders are in a seasonal lull period that lasts from late autumn to late winter. The spring selling season begins in February and gets into full gear in March and April.
For builders, the key will be the Millennial Generation and its employment situation. Since the real estate bust, Millennials have been caught in a vise 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 the young from renting to buying.