Exchange traded funds that focus on real estate have been hitting new highs lately. iShares Cohen and Steers Realty Majors (ICF) is up 25% year-to-date and iShares Dow Jones U.S. Real Estate (IYR) is up 23%. With recent news focusing on a weakening in the housing market, it may be a wonder that these ETFs are doing well.
Real Estate ETFs invest in Real Estate Investment Trusts (REITs), which have been popular for high yields. REITs tend to focus more on commercial property and commercial rents have been robust. ETFs with a homebuilding focus, such as SPDR Homebuilders (XHB) focus on residential property and are impacted by home sales.
The chart below looks at the difference between IYR and XHB over the last six months. Although both are related to the real estate industry, it is important to see the exact focus of the ETF.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.