(1:00) - What Is The Current State Of The Housing Market? (9:45) - Breaking Down Rental and Commercial Real Estate (20:10) - How To Gain Exposure Using ETFs (28:45) - Who Stands To Benefit From A Booming Housing Market? (37:15) - Episode Roundup: Podcast@Zacks.com
In this episode of ETF Spotlight, I speak with Zacks Senior Equity Strategist, Tracey Ryniec, about the hot housing market.
The pandemic supercharged the housing market, thanks to migration from urban centers to suburbs and record low mortgage rates. Home prices hit an all-time high last year, inventory remains at historical lows, but mortgage rates have started rising. Could the red-hot housing market cool in 2022?
When the pandemic lockdowns started, rents had plunged in cities across the country. In some cities, median rents have rebounded significantly and exceed pre-pandemic levels now. More than 150 office buildings or other commercial properties in major cities converted to apartments in 2021, per WSJ.
Tech giants like Apple (
AAPL Quick Quote AAPL - Free Report) , Microsoft ( MSFT Quick Quote MSFT - Free Report) and Google ( GOOGL Quick Quote GOOGL - Free Report) have been frantically buying and leasing office buildings around the country during the pandemic. Some of them are transitioning to a hybrid work model, which requires employees to come into the office at least a few days a week. Some others have permanently switched to remote work.
The most popular homebuilder ETF--the iShares U.S. Home Construction ETF (
ITB Quick Quote ITB - Free Report) --is a market cap weighted ETF of home construction and related stocks. It is top heavy with four holdings accounting for about 45% of the portfolio.
The SPDR S&P Homebuilders ETF (
XHB Quick Quote XHB - Free Report) is an equal-weighted ETF that has significant exposure to building-products and home-furnishing companies as well in addition to homebuilders. Both ETFs are down significantly this year and look cheap at current levels.
Home furnishing retailers like Ethan Allen (
ETD Quick Quote ETD - Free Report) and WilliamsSonoma ( WSM Quick Quote WSM - Free Report) are also worth a look.
Rental apartments and self-storage REITs benefit from rising rates and inflation as their rents generally reset every year. However, most broad REIT ETFs have a lot of exposure to office buildings and shopping malls, which have longer term leases.
The Nuveen ShortTerm REIT ETF (
NURE Quick Quote NURE - Free Report) and the iShares Residential and Multisector Real Estate ETF ( REZ Quick Quote REZ - Free Report) have over 50% exposure to residential REITs and rest to areas like healthcare, self-storage and specialized REITs.
The first actively managed pure play residential US REIT ETF--The Home Appreciation U.S. REIT ETF (HAUS)--launched this week. It holds REITs focused on apartments, single-family rentals, and senior housing.
Tune in to the podcast to learn more. Make sure to be on the lookout for the next edition of ETF Spotlight! If you have any comments or questions, please email firstname.lastname@example.org.
(In full disclosure, Neena owns shares of XHB in the ETF Investor Portfolio.)