RPrices are rising as potential home buyers are excluded from the housing market and forced to return to rent, thus bolstering exchange traded funds for residential real estate.
Asking rents for homes have risen nearly 13% since the start of the year that ended in July, the biggest annual gain in five years, according to real estate data company Yardi Matrix, reports the Wall Street Newspaper.
Plus, asking rents for apartments rose at a slower rate of 8.3% year-to-date that ended in July, according to Yardi Matrix. The difference between apartment and unit rents partly reflects weaker demand in city centers that have experienced population declines due to the COVID-19 pandemic, but those markets have rebounded somewhat in recent months with the deployment of vaccines.
Observers argued that the jump partly reflects higher demand from those who cannot afford to buy homes, as well as city dwellers who moved to the suburbs during the pandemic.
Rentals continue to attract strong demand as stiff competition in the housing market this year pushed up prices for homes for sale 23% year on year in the last quarter.
The affordable housing shortage has also been exacerbated by new buyers from Wall Street investors, who bought $ 87 billion worth of homes in the first half of 2021, according to real estate firm Redfin, including a record 68,000 homes. in the second trimester. One in six home sales were acquired by an investor in the second quarter of 2021, according to Redfin, and in Atlanta, Phoenix and Miami the ratio was closer to one in four.
Additionally, Doug Ressler, a researcher at Yardi, pointed out that new homes meant to be rented out instead of sold accounted for about 12% of single-family construction in 2021.
“Institutional players are looking for some of the same homes that would be starting homes for homeowners,” Desiree Fields, a geography professor at the University of California at Berkeley who studies the single-family rental industry, told the WSJ.
Investors who wish to participate in the real estate action can access the space through funds like the Vanguard Real Estate ETF (NYSEArca: VNQ). VNQ seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of the MSCI US Investable Market Real Estate 25/50 Index which measures the performance of REITs in publicly traded stocks and others. investments related to real estate. However, large-scale REIT sector ETFs have low exposure to residential REITs, with VNQ’s underlying portfolio comprising a 14.9% slant towards residential REITs.
On the other hand, ETF investors who wish to gain exposure to this continuing trend in the housing market may consider REITs with a strong residential component, such as the IShares Capped Residential Real Estate ETF (NYSEArca: REZ) and NuShares Short Term ETFs (BATS: NURE). NURE includes a strong 49.7% slant towards apartment or rental REITs, while REZ has a 51.1% weight in residential REITs.
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