Real estate ETFs at historic highs: here’s why

The US real estate industry is in the pink this year. Nuveen Short Term ETF (NURE) was the best performer with gains of 40.2% since the start of the year. Several real estate ETFs have hovered around historic highs.

Below we highlight the reasons that spurred real estate ETFs.

Rising inflation

The current economic context is favorable for a return of inflation. The U.S. consumer price inflation rate stood at 5.4% in July 2021, unchanged from the previous month’s 13-year high and slightly above market expectations of 5.3 %, thanks to an easy comparison caused by the coronavirus crisis, the reopening of the economy and persistent supply constraints. In an environment of rising inflation, real estate stocks are a good bet. Both the resale value of the property and the rental income increase with price inflation.

Some specific categories within REITs like shopping malls, apartments and self-storage have shown promise in recent times as they benefit from the reopening. Residential and commercial real estate rents are rebounding strongly this year, after falling last year due to the pandemic.

Rising house prices are a boon for tenants

The US residential construction industry is on fire. Thanks to extremely low mortgage rates, home sales are dynamic. But higher demand for home purchases along with a shortage of labor and land have pushed up home prices. It’s a great scenario for tenants.

With some analysts, we also believe that the rapid rise in home prices is likely to drive potential buyers away from the property and steer them into the rental market. “Homeownership is still dead in this country because the only people buying homes right now are people with equity, good credit and jobs,” said Grant Cardone, home investor. multi-family, to Yahoo Finance, cited in an article.

Still unstable labor market = high demand for rents from low-income groups

The labor market is still far from stable. Although the US economy created 943,000 jobs in July 2021, the maximum in eleven months and exceeding market expectations of 870,000, the economy has yet to reach full employment. This means that the demand for real estate for rental is likely to remain strong among middle- and low-income consumers.

Booming Business Cloud and 5G Deployment

A tremendous tech rally has helped data center REITs lately. Data center REITs own and operate facilities that help customers store data securely. These FPIs provide continuous power supplies, air coolers and physical security.

Meanwhile, the cell tower FPI area has benefited from the rapid rollout of 5G. Investors should note that the increased consumption of mobile data has boosted this space.

Real estate is lucrative in a low yield environment

If that is not enough, a general low rate environment is ideal for real estate stocks and ETFs as they are high yielding in nature. The benchmark yield on 10-year US Treasuries was 1.31% on September 1. In such a low yield environment, the dividends offered by real estate ETFs are quite solid.

Some of the decent real estate ETF games right now are VanEck Vectors Mortgage REIT Income ETF (DEATH) (yield 6.80% per year), Global X SuperDividend REIT ETF SRET (yield 6.45% per year) and Invesco KBW Premium Yield Equity REIT ETF KBWY (yield 6.00% per year).

Against this background, below we highlight a few real ETFs hovering around a 52 week high.

Focus on ETFs

Global X Data Center REIT & Digital Infrastructure VPN – Yield of 0.62% per year

Pacer Benchmark & ​​Infrastructure SRVR Real Estate ETF – Yield of 1.33% per year

IShares IYR US Real Estate ETF– Yield of 1.85% per year

Cohen & Steers REIT iShares ETF ICF – Yield of 1.81% per year

S&P 500 Real estate sector SPDR XLRE – Yield of 2.78% per year

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ETF Invesco KBW Premium Yield Equity REIT (KBWY): ETF Research Reports

IShares Cohen & Steers REIT ETF (ICF): ETF Research Reports

Real Estate Select Sector SPDR ETF (XLRE): ETF Research Reports

IShares US Real Estate ETF (IYR): ETF Research Reports

ETF Global X SuperDividend REIT (SRET): ETF Research Reports

MorphoSys AG Unsponsored ADR (MOR): Free Stock Analysis Report

Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR): ETF Research Reports

Global X Data Center REITs & Digital Infrastructure ETF (VPN): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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