Real estate investment trusts (REITs) had a banner year in 2021, and more strength could be ahead in 2022 as real estate prices continue to skyrocket.
The S&P US REIT index rose to almost 40% last year. The pandemic certainly changed the landscape for real estate as more property owners used their living spaces as live-work safe havens amid social distancing measures.
“Publicly-traded REITs rode a strong December to wrap up 2021 with total returns for the year up more than 40 percent,” a Wealth Management article notes. “And while some of those gains stem from a recovery from the depths of pandemic, REIT total returns are also up relative to where they were pre-pandemic.”
“Overall, the FTSE Nareit All Equity REITs index was up 41.3 percent for 2021—the best single-year gain since 1976,” the article adds.
Market experts believe that real estate will continue its strength in 2022.
“The demand for real estate will remain strong nationally throughout 2022,” said Carlo Siracusa, president of Weichert Residential Sales. “Buyer demand will continue to be driven by higher wages, improving employment and rising stock market values. The lack of inventory will remain the biggest obstacle. The industry could move closer to equilibrium slowing the rate of price escalation if there is an increase in housing starts, which are currently dangerously low.”
“One thing yet to be determined is the long-term impact of the work-from-home trend,” Siracusa adds. “If this continues for the foreseeable future, we will see more people moving to markets where they would prefer to live, not necessarily near their employer.”
Get High Yields With This ETF
To temper the effects of inflation and rising rates, one way to stay a step ahead is through high-yielding assets. With a 30-day SEC yield of almost 6% as of January 11, investors can get that type of yield with the Invesco KBW Premium Yield Equity REIT ETF (KBWY).
REITs can offer investors fixed income benefits. KBWY is one to consider for passive income with higher yields than safe haven government debt that may not be able to keep pace with inflation.
KBWY seeks to track the investment results of the KBW Nasdaq Premium Yield Equity REIT Index, which is a modified-dividend yield-weighted index of domestic equity real estate investment trusts (REITs) of small- and mid-capitalization, as determined by the index provider. The underlying index is designed to track the performance of small- and mid-capitalization equity REITs that have competitive dividend yields and are publicly traded in the U.S.
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