Robotics and artificial intelligence could certainly change the way consumers buy and sell real estate. This next wave of disruption could affect real estate-focused funds that ETF investors should watch.
One area could be the 6% payment structure that real estate brokers currently employ in a transaction.
“This is a highly antiquated payment structure,” Frankel wrote. “Before the internet, real estate agents had to do far more work to sell or search for a home on behalf of their clients than they do today.”
Speaking on the topic of commissions, they could be eliminated completely via platforms like iBuyer, which essentially cuts out the middleman.
“On a similar note, the iBuyer idea is gaining serious traction,” said Frankel. “It’s not inconceivable that in a decade or so, Zillow, Opendoor, Offerpad, and Redfin — plus whatever new companies join the party over the next few years — could build up a serious share of the real estate market.”
Another area is not in the core business of buying/selling real estate itself, but the actual product—the homes.
“Over the past century or so, there has been a clear trend toward bigger and bigger homes,” noted Frankel. “The average new home in 1920 was 1,048 square feet.”
ETFs that focus on REITs provide investors exposure and easy accessibility to the real estate sector as opposed to investing directly in real property itself and the potential issues that go with it, including landlord-tenant duties, performing renovations if necessary and property maintenance. Even if rate hikes come in 2020, investors fretting about the increasing cost to borrow money don’t have to worry about financing with REIT investments.
Here are three ETFs that could be affected by the next wave of disruption in the real estate industry:
- Schwab US REIT ETF (NYSEArca: SCHH): SCHH seeks to track as closely as possible the total return of the Dow Jones U.S. Select REIT IndexTM. The fund invests in securities included in the index, which is a float-adjusted market capitalization weighted index comprised of REITs.
- iShares US Real Estate ETF (NYSEArca: IYR): IYR seeks to track the investment results of the Dow Jones U.S. Real Estate Index and generally invests in securities of the underlying index and in depositary receipts representing securities of the underlying index. The index measures the performance of the real estate sector of the U.S. equity market and may include large-, mid- or small-capitalization companies.
- Vanguard Real Estate ETF (NYSEArca: VNQ): VNQ seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of the MSCI US Investable Market Real Estate 25/50 Index that measures the performance of publicly traded equity REITs and other real estate-related investments. VNQ attempts to track the index by investing either directly or indirectly in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.
For more real estate trends, visit ETFTrends.com.