Many U.S. renters are eschewing home purchases despite the means to acquire a new house, bolstering returns for a residential real estate investment trust-related exchange traded fund.
The iShares Residential Real Estate Capped ETF (NYSEArca: REZ) includes a 43.9% weight toward residential REITs, along with 54.1% allocation toward specialty REITs, which include companies that provide storage space.
Among the ETF’s top holdings, residential REITs include Equity Residential (NYSE: EQR) 9.8%, Avalonbay Communities REIT (NYSE: AVG) 8.0%, Essex Property Trust REIT (NYSE: ESS) 4.6%, UDR Inc (NYSE: UDR) 4.2% and Camden Property Trust REIT (NYSE: CPT) 3.6%.
REZ has increased 22.8% year-to-date and shows a 3.3% 12-month yield.
According to a recent Federal Reserve Bank of New York survey of renters, respondents believe he or she will have a 63% chance to move over the next three years but only a 44% chance to buy a home when moving.
The “decrease in homeownership is particularly pronounced for younger households, implying that many of them are remaining renters for longer than in the past,” the Federal Reserve Bank said. [Millennials Crimping Homebuilder ETF Recovery]
Current economic fundamentals are given as the main impediment to home ownership. Specifically, a majority of renters believe their weak balance sheets, low income and lack of access to credit.