The timing couldn’t be more auspicious for the real estate sector. With the market recovering from a catastrophic collapse during the financial crisis over a decade ago, Covid-19 is putting a heavier emphasis on homes as a live-work space with social distancing measures in place.
This, in turn, is opening up opportunities for real estate-focused ETFs like the Hoya Capital Housing ETF (HOMZ). HOMZ seeks to provide investment results that correspond generally to the total return performance of the Hoya Capital Housing 100 Index, a rules-based Index designed to track the 100 companies that collectively represent the performance of the US Housing Industry.
The Index is designed to track the companies with the potential to benefit from rising rents, appreciating home values, and a persistent housing shortage. HOMZ is a passively-managed, diversified ETF that offers efficient and cost-effective exposure to residential real estate, one of the largest asset classes in the world.
HOMZ invests in 100 domestic companies involved in the housing industry, including residential REITs, homebuilders, home improvement companies, and real estate services and technology firms. A concentration in residential ETFs gives investors exposure to a subsector that’s experiencing growth amid the pandemic as opposed to commercial real estate where businesses are shifting away from the need for office space.
The housing sector is also seeing a marked shift to more home ownership from millennials. Purchase applications rose during the months of July and August with millennials representing half of the applicants.
“At 50%, Millennials represented the largest share of homebuyers in 2020, followed by Generation Xers (31%) and baby boomers (17%), according to CoreLogic loan application data for January through August 29, 2020,” real estate analytics firm CoreLogic noted on their website.
Additional tailwinds can come from a continuance of low mortgage rates combined with more work-from-home activity.
“The U.S. housing industry has provided relative shelter amid the turbulence of 2020 and has built momentum in recent months as resilient demographic-driven housing demand along with lower mortgage rates have stimulated renewed activity across the housing industry,” an email noted from HOMZ, The Housing ETF. “The sharp rebound in housing market activity comes as Americans are spending more time than ever in their homes, and it has become more clear that housing is perhaps the ultimate essential service.”
Another fund ETF investors can look at for real estate exposure is the FlexShares Global Quality Real Estate Index Fund (GQRE). The fund seeks investment results that correspond generally to the price and yield performance of the Northern Trust Global Quality Real Estate IndexSM, which is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to quality, value, and momentum factors relative to the Northern Trust Global Real Estate Index.
For more market trends, visit the ETF Trends.