Real Estate ETFs at All-Time Highs: Here’s Why
The US real estate sector is pink this year. Nuveen Short Term REIT ETF (NURE) was the best performer with 40.2% growth since the beginning of the year. Several real estate ETFs are hovering around all-time highs.
Below we highlight the reasons that gave real estate ETFs a boost.
Rising inflation
The current economic environment is favorable for an inflationary comeback. The US consumer price inflation rate was 5.4% in July 2021, unchanged from the 13-year high of the previous month and slightly above market expectations of 5.3%, thanks to a simple comparison due to the coronavirus crisis, the reopening of the Economy and ongoing supply bottlenecks. In an environment of rising inflation, real estate stocks are a good choice. Both the resale value of the property and the rental income increase with price inflation.
Some specific categories within REITs such as shopping malls, apartments, and self-storage have shown great promise lately as they benefit from the reopening. Residential and commercial property rents are rebounding strongly this year after plummeting last year due to the pandemic.
Rise in home prices is a boon for renters
The US housing sector is on fire. Thanks to extremely low mortgage rates, home sales are optimistic. But higher demand for home purchases, as well as labor and land shortages, have driven home prices higher. This is a great scenario for tenants.
Along with some analysts, we also believe that rapidly rising property prices will deter potential homebuyers from property and draw them into the rental market. “Homeownership is still dead in this country because the only people currently buying houses are people with equity, big loans and a job,” multi-family home investor Grant Cardone told Yahoo Finance in an article.
Still shaky labor market = high rental demand from low-income groups
The labor market is far from stable. Although the U.S. economy created 943,000 jobs in July 2021, the maximum in eleven months and above market expectations of 870,000, the economy has not yet reached full employment. This means that demand for rental properties from middle- and low-income consumers is likely to remain strong.
The story goes on
Booming cloud business and introduction of 5G
An amazing tech rally has been helping REITs in the data center lately. Data center REITs own and manage facilities that help customers store data securely. These REITs provide continuous power, air-cooled chillers, and physical security.
Meanwhile, cell tower REITs have benefited from the rapid adoption of 5G. Investors should note that the increased consumption of mobile data has widened this area.
Real estate is lucrative in an environment with low returns
If these are not enough, a general low-interest environment is ideal for real estate stocks and ETFs, as these are inherently high-interest. The benchmark yield on 10-year US Treasuries was 1.31% on September 1. Against this backdrop of low returns, the dividends offered by real estate ETFs are quite robust.
Some of the decent real estate ETF games right now are VanEck Vectors Mortgage REIT Income ETF (MORT) (yield 6.80% annually), Global X SuperDividend REIT ETF SRET (yield 6.45% annually) and Invesco KBW Premium Yield Equity REIT ETF KBWY (return 6.00% annually).
With that in mind, below we highlight a few real-state ETFs that are hovering around a 52-week high.
ETFs in focus
Global X data center REITs and digital infrastructure VPN – Income 0.62% annually
Pacer Benchmark & Infrastructure Real Estate ETF SRVR – Income 1.33% annually
US real estate iShares ETF IYR– Income 1.85% annually
Cohen & Steers REIT iShares ETF ICF – Income 1.81% annually
S&P 500 Real Estate Sector SPDR XLRE – Income 2.78% annually
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Invesco KBW Premium Yield Equity REIT ETF (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
Global X SuperDividend REIT ETF (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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