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The real estate sector has been on a tear this year, buoyed by lower interest rates and improving economic conditions, pushing many ETFs to new highs.
Vanguard Real Estate ETF (VNQ - Free Report) , iShares U.S. Real Estate ETF (IYR - Free Report) , Real Estate Select Sector SPDR Fund (XLRE - Free Report) , iShares Residential and Multisector Real Estate ETF (REZ - Free Report) and Invesco S&P 500 Equal Weight Real Estate ETF have hit new highs in the latest trading session and are exhibiting strong momentum. Any of these could be excellent picks for investors seeking to benefit from the current market environment (see: all the Real Estate ETFs here).
Though the Fed is planning to accelerate the withdrawal of its bond-buying program at its December meeting to combat a surge in inflation, still lower rates are driving up the sector. Lower rates have made buying real estate and refinancing mortgages more affordable. This, in turn, is boosting activity in the market and real estate stocks.
Meanwhile, the U.S. economy is in good shape with a pick-up in hiring, increase in wages and rise in consumer confidence. Confidence among the large U.S. companies also jumped to an all-time high as indicated by the solid manufacturing data. Manufacturing activity grew at a faster pace in November with producers trying to keep up with demand amid ongoing supply shortages and delays. The manufacturing sector recorded 18 straight months of growth going back to the spring of 2020 when the pandemic broke.
Growth in the economy translates into greater demand for real estate, higher occupancy levels and landlords’ greater power to ask for higher rents. An uptick in home prices is also driving the real estate sector higher as more consumers are moving toward rental. Additionally, REITs have benefited from inflation concerns as it is often considered a hedge against inflation (read: 5 Top-Ranked ETFs to Buy At Bargain Prices).
Further, the new strain of COVID-19 cases has raised the appeal for these assets. This is because these often act as a safe haven in times of market turbulence and concurrently offer higher returns due to their outsized yields. REITs own and operate income-producing real estate. They are required to distribute at least 90% of taxable income to shareholders annually in the form of dividends and, in turn, can deduct those dividends paid from their corporate taxable income. Thus, REITs offer juicy dividend yields. Further, REITs have a low correlation with other stocks and bonds, thereby providing huge diversification benefits to the portfolio.
Vanguard Real Estate ETF follows the MSCI US Investable Market Real Estate 25/50 Index and holds 170 stocks in its basket. Specialized REITs take the largest share at 26.9%, while residential REITs and industrial REITs round off the top three with double-digit exposure each. Vanguard Real Estate ETF has an expense ratio of 0.12%.
Vanguard Real Estate ETF is the most popular and liquid ETF with AUM of $46.7 billion and an average daily volume of around 4 million shares a day. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares U.S. Real Estate ETF offers exposure to U.S. real estate companies and REITs, which invest in real estate directly and trade like stocks. It follows the Dow Jones U.S. Real Estate Capped Index. iShares U.S. Real Estate ETF holds a basket of 88 securities with specialized REITs dominating the portfolio at 37.4%, followed by residential REITs (15.2%) and industrial REITs (12.2%).
iShares U.S. Real Estate ETF has amassed $6.1 billion in its asset base while trading in a heavy volume of 7 million shares a day on average. It charges 41 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 ETFs Trading At New Highs).
Real Estate Select Sector SPDR Fund provides exposure to companies from real estate management and development and REITs, excluding mortgage REITs by tracking the Real Estate Select Sector Index. With AUM of $5.3 billion, Real Estate Select Sector SPDR Fund holds 29 stocks in its basket with some concentration on the top two firms.
Real Estate Select Sector SPDR Fund charges 12 bps in annual fees and trades in an average daily volume of 6.4 million shares. XLRE has a Zacks ETF Rank #1 with a High-risk outlook.
iShares Residential and Multisector Real Estate ETF (REZ - Free Report)
iShares Residential and Multisector Real Estate ETF offers exposure to the U.S. residential real estate sector and follows the FTSE Nareit All Residential Capped Index. It has AUM of $1.2 billion and holds 42 stocks in its basket with a double-digit concentration on the top firm.
iShares Residential and Multisector Real Estate ETF has 0.48% in expense ratio and an average daily volume of 107,000 shares. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Invesco S&P 500 Equal Weight Real Estate ETF
Invesco S&P 500 Equal Weight Real Estate ETF equally weighs stocks in the real estate sector of the S&P 500 Index by tracking the S&P 500 Equal Weight Real Estate Index. It holds 30 stocks in its basket with none accounting for more than 4% of the assets.
With AUM of $80.6 million, Invesco S&P 500 Equal Weight Real Estate ETF charges 40 bps in annual fees and trades in an average daily volume of 37,000 shares. EWRE has a Zacks ETF Rank #3 with a High-risk outlook.
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Real Estate ETFs Scaling New Highs: Here's Why
The real estate sector has been on a tear this year, buoyed by lower interest rates and improving economic conditions, pushing many ETFs to new highs.
Vanguard Real Estate ETF (VNQ - Free Report) , iShares U.S. Real Estate ETF (IYR - Free Report) , Real Estate Select Sector SPDR Fund (XLRE - Free Report) , iShares Residential and Multisector Real Estate ETF (REZ - Free Report) and Invesco S&P 500 Equal Weight Real Estate ETF have hit new highs in the latest trading session and are exhibiting strong momentum. Any of these could be excellent picks for investors seeking to benefit from the current market environment (see: all the Real Estate ETFs here).
Though the Fed is planning to accelerate the withdrawal of its bond-buying program at its December meeting to combat a surge in inflation, still lower rates are driving up the sector. Lower rates have made buying real estate and refinancing mortgages more affordable. This, in turn, is boosting activity in the market and real estate stocks.
Meanwhile, the U.S. economy is in good shape with a pick-up in hiring, increase in wages and rise in consumer confidence. Confidence among the large U.S. companies also jumped to an all-time high as indicated by the solid manufacturing data. Manufacturing activity grew at a faster pace in November with producers trying to keep up with demand amid ongoing supply shortages and delays. The manufacturing sector recorded 18 straight months of growth going back to the spring of 2020 when the pandemic broke.
Growth in the economy translates into greater demand for real estate, higher occupancy levels and landlords’ greater power to ask for higher rents. An uptick in home prices is also driving the real estate sector higher as more consumers are moving toward rental. Additionally, REITs have benefited from inflation concerns as it is often considered a hedge against inflation (read: 5 Top-Ranked ETFs to Buy At Bargain Prices).
Further, the new strain of COVID-19 cases has raised the appeal for these assets. This is because these often act as a safe haven in times of market turbulence and concurrently offer higher returns due to their outsized yields. REITs own and operate income-producing real estate. They are required to distribute at least 90% of taxable income to shareholders annually in the form of dividends and, in turn, can deduct those dividends paid from their corporate taxable income. Thus, REITs offer juicy dividend yields. Further, REITs have a low correlation with other stocks and bonds, thereby providing huge diversification benefits to the portfolio.
We have profiled the five ETFs in detail below:
Vanguard Real Estate ETF (VNQ - Free Report)
Vanguard Real Estate ETF follows the MSCI US Investable Market Real Estate 25/50 Index and holds 170 stocks in its basket. Specialized REITs take the largest share at 26.9%, while residential REITs and industrial REITs round off the top three with double-digit exposure each. Vanguard Real Estate ETF has an expense ratio of 0.12%.
Vanguard Real Estate ETF is the most popular and liquid ETF with AUM of $46.7 billion and an average daily volume of around 4 million shares a day. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares U.S. Real Estate ETF (IYR - Free Report)
iShares U.S. Real Estate ETF offers exposure to U.S. real estate companies and REITs, which invest in real estate directly and trade like stocks. It follows the Dow Jones U.S. Real Estate Capped Index. iShares U.S. Real Estate ETF holds a basket of 88 securities with specialized REITs dominating the portfolio at 37.4%, followed by residential REITs (15.2%) and industrial REITs (12.2%).
iShares U.S. Real Estate ETF has amassed $6.1 billion in its asset base while trading in a heavy volume of 7 million shares a day on average. It charges 41 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 ETFs Trading At New Highs).
Real Estate Select Sector SPDR Fund (XLRE - Free Report)
Real Estate Select Sector SPDR Fund provides exposure to companies from real estate management and development and REITs, excluding mortgage REITs by tracking the Real Estate Select Sector Index. With AUM of $5.3 billion, Real Estate Select Sector SPDR Fund holds 29 stocks in its basket with some concentration on the top two firms.
Real Estate Select Sector SPDR Fund charges 12 bps in annual fees and trades in an average daily volume of 6.4 million shares. XLRE has a Zacks ETF Rank #1 with a High-risk outlook.
iShares Residential and Multisector Real Estate ETF (REZ - Free Report)
iShares Residential and Multisector Real Estate ETF offers exposure to the U.S. residential real estate sector and follows the FTSE Nareit All Residential Capped Index. It has AUM of $1.2 billion and holds 42 stocks in its basket with a double-digit concentration on the top firm.
iShares Residential and Multisector Real Estate ETF has 0.48% in expense ratio and an average daily volume of 107,000 shares. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Invesco S&P 500 Equal Weight Real Estate ETF
Invesco S&P 500 Equal Weight Real Estate ETF equally weighs stocks in the real estate sector of the S&P 500 Index by tracking the S&P 500 Equal Weight Real Estate Index. It holds 30 stocks in its basket with none accounting for more than 4% of the assets.
With AUM of $80.6 million, Invesco S&P 500 Equal Weight Real Estate ETF charges 40 bps in annual fees and trades in an average daily volume of 37,000 shares. EWRE has a Zacks ETF Rank #3 with a High-risk outlook.