Home sales have fallen off, but rental-home owners are enjoying a boom as more Americans put off home purchases for renting a living space. Investors can also capitalize on this shift in living through real estate investment trust-related exchange traded funds with high exposure to residential REITs.
Invitation Homes Inc. (NYSE: INVH), which owns more than 80,000 single-family houses, and American Homes 4 Rent (NYSE: AMH), which has nearly 53,000, announced record occupancy and rents this week, the Wall Street Journal reports.
Invitation Homes revealed same-home occupancy rate increased up to 96.5% while rents on leases signed during the period were 5.3% higher year-over-year. Meanwhile, occupancy and rent growth for American Homes 4 Rent were hovering around 96.5% and 4.7%, respectively.
John Pawlowski, an analyst at the real-estate research firm Green Street Advisors, pointed out that those are highs for both companies and better than apartment owners.
“The rental market broadly is on very firm footing,” Pawlowski told the WSJ.
Demand for family-size rentals in highly rated suburban school areas have enjoyed enough demand for companies to be profitable.
“While expenses remain a fly in the ointment, top line growth is coming in strong enough to keep the bottom line intact,” JPMorgan Chase analysts wrote in a review of American Homes 4 Rent’s results.
Home affordability remains a key factor that has kept would-be buyers from new home purchases. Researchers at John Burns Real Estate Consulting recently calculated that even after 30-year mortgage rates fell from nearly 5% in November to below 4%, only 54% of Americans can afford to purchase a house that is 20% below the median price in their immediate area.
“For a renter, there aren’t many other options if you have a family that’s too big for an apartment and not a lot of money for a down payment,” Trevor Tetzlaff, one of the John Burns Real Estate Consulting researchers, told the WSJ.
ETF investors who are interested in gaining exposure to this ongoing trend in the housing market can consider residential REITs-related ETFs, such as the iShares Residential Real Estate Capped ETF (NYSEArca: REZ) and NuShares Short-Term REIT ETF (BATS: NURE). NURE includes a hefty 47.4% tilt toward apartment or rental-related REITs while REZ has a 49.0% weight in residential REITs.
Additionally, INVH accounts for 5.6% of NURE’s underlying index and 3.6% of REZ. AMH makes up 3.5% of NURE’s portfolio and 1.9% of REZ’s holdings.
For more information on real estate investment trusts, visit our REITs category.