The U.S. real estate sector has been under pressure this year with most ETFs returning negative in the year-to-date frame.
Real Estate Select Sector SPDR Fund ( XLRE Quick Quote XLRE - Free Report) has been the best performer in the laggards’ space with 5.9% year-to-date losses while Invesco KBW Premium Yield Equity REIT ETF KBWY and Global X SuperDividend REIT ETF (have been tagged as the worst performers with about 37.8% and 44.4% losses, respectively. SRET Quick Quote SRET - Free Report)
However, the losing trend may shift ahead because of the below-mentioned reasons.
According to Wall Street forecaster James Bianco, the current economic backdrop is favorable for an inflation comeback,
as quoted on CNBC. The 30-year Breakeven Inflation Rate was 1.76% in September 2020, up from 1.71% in August 2020, 1.65% in the year-ago month and the one-year low of 1.29% recorded in March 2020.
Plus, the annual consumer price inflation rate in the United States rose to 1.4% in September of 2020 from 1.3% in August, matching expectations and reaching the
highest since March. In a rising inflation environment, real estate stocks act as a good bet. Both, resale value of the property and rental income, rise with price inflation. Uptick in Home Prices is a Boon for Renters
The U.S. homebuilding sector is on fire. Thanks to extremely low mortgage rates, home sales are upbeat. But higher demand for home buying as well as lack of labor and land has boosted home prices. The median home sale price rose 15% year over year to $320,625 — the highest on record, according to a
new report from the technology-powered real estate brokerage Redfin released on Oct 8.
This is a great scenario for renters.
Along with some analysts, we too believe that fast-rising home prices are likely to keep prospective homebuyers away from the ownership and direct them toward the rental market. “Homeownership is still dead in this country because the only people that are buying homes right now are people that have equity, great credit and a job,” multi-family housing investor Grant Cardone told Yahoo Finance, quoted on an article. Still Shaky Job Market = High Demand for Rent from Low-Income Group
The job market is still far from steady. The U.S. economy added 661 thousand jobs in September 2020, easing sharply from an upwardly revised 1.489 million in the previous month, and below market forecasts of 850 thousand. The coronavirus fears are also not subsiding anytime soon. This means demand for real estates for rent purpose is likely to remain strong from middle-income or low-income consumers.
Real Estates Are Lucrative Amid a Low-Yield Environment
If these are not enough, a general low-rate environment is great for real estate stocks and ETFs as these are high-yielding in nature. The benchmark U.S. 10-year treasury yield was 0.85% on Oct 23. Against such a low-yield backdrop, dividends offered by real estate ETFs are quite sturdy.
Some of the decent real estate ETF plays right now are
Real Estate Select Sector SPDR ETF ( XLRE Quick Quote XLRE - Free Report) (yields 3.10% annually), PPTY U.S. Diversified Real Estate ETF ( PPTY Quick Quote PPTY - Free Report) (yields 3.84% annually) and VanEck Vectors Mortgage REIT Income ETF ( MORT Quick Quote MORT - Free Report) (yields 11.83% annually). These ETFs have a Zacks Rank #3 (Hold).
Against this backdrop, below we highlight a few real state ETFs that have stayed steady in recent weeks.
ETFs in Focus IQ US Real Estate Small Cap ETF (– Up 6.2% in the Past four weeks, Yields 5.81% annually ROOF Quick Quote ROOF - Free Report) NETLease Corporate Real Estate ETF (– Up 4.8% in the Past four weeks, Yields 3.40% annually NETL Quick Quote NETL - Free Report) Nuveen Short-Term REIT ETF ( NURE Quick Quote NURE - Free Report) – Up 5.7% in the Past four weeks, Yields 3.24% annually SPDR Dow Jones REIT ETF RWR – Up 4.7% in the Past four weeks, Yields 3.86% annually iShares Residential Real Estate ETF ( REZ Quick Quote REZ - Free Report) – Up 4.3% in the Past four weeks, Yields 3.32% annually Want key ETF info delivered straight to your inbox?
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