U.S. consumers are losing confidence in the housing market, with renters having a less favorable outlook on hone ownership. On the other hand, as more prefer to stick to renting, a residential real estate investment trust-related exchange traded fund may continue to find support from rising rents.
According to the National Association of Realtors, the number of Americans who believe now is a good time to purchase a home was beginning to slip in the second quarter this year, reports Diana Olick for CNBC.
About 62% of renters said it is a good time to become a homeowner, but the number is down from 68% at the end of last year. Additionally, those under the age of 35 were the least confident, with Millennials having the lowest home ownership rate of their age group in recorded history.
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Contributing to the delayed home ownership rate among Millennials, high student debt has weighed on many would-be buyers. According to Realtor’s report, half of respondents with student debt and under the age of 35 said they did not want a mortgage.
[related_stories]“The financial and emotional impact of repaying student debt is contributing to a delay in purchasing a home for many would-be buyers,” Lawrence Yun, chief economist of the Realtors, said. “At a time of quickly rising rents, mortgage rates at all-time lows and increasing housing wealth, a lot of young adults in their prime buying years are struggling to enter the market and are ultimately missing out on the stability and wealth accumulation that owning a home can provide.”
On the other hand, almost four of 5 people who own a home, along with those over the age of 55, believed it is a good time to buy. Homeowners have seen their equity increase recently, which may help push them to upgrade.
“Meanwhile, renters interested in buying continue to face minimal choices, strong competition and home prices growing faster than their incomes,” Yun added.
As more have been stuck with renting, residential REITs could continue to find support. For instance, the iShares Residential Real Estate Capped ETF (NYSEArca: REZ), which includes a 45.7% tilt toward residential REITs, along with 33.9% healthcare REITs and 20.3% specialized REITs, has increased 10.5% year-to-date. REZ also offers an attractive 3.89% 12-month yield.
Related: 44 Best REITs ETFs to Generate Yields
Investors can also gain residential REITs exposure with broader REIT ETF options. For example, the Vanguard REIT ETF (NYSEArca: VNQ) includes a 15.8% weight toward residential REITs. VNQ is up 15.7% year-to-date and offers a 3.27% 12-month yield.
iShares Residential Real Estate Capped ETF