With the Fed slates to keep rates low for years, real estate financing should get a shot in the arm as the sector continues to recover. The August 2020 LegalShield Law Index saw its two primary real estate indices that measure homebuilding and home sales reach all-time or near record highs.
“Housing remains one of the few bright spots in an otherwise troubled economy and our predictive data suggest that the sector should remain healthy into next year,” said Jeff Bell, CEO of LegalShield. “Mortgage rates are at record lows and builders are having trouble keeping up with the demand, as the pandemic drives families out of cities and into the suburbs and exurbs. The price of lumber, however, needs to be watched. In August, it soared to an all-time high and remains more than double its mid-April level, and there is the additional concern now of uncontrolled fires in the West, which could further limit supply, driving prices even higher. If the cost of hiring construction workers or price of building products rises too far, too fast, then we could see a weakening in housing demand. And we certainly don’t need residential housing following the path of commercial real estate such as malls, hotels and offices.”
ETF investors who want to take advantage of the forthcoming changes in real estate can look at the FlexShares Global Quality Real Estate Index Fund (GQRE). The fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Global Quality Real Estate IndexSM. The index 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.
Another fund to check out is the Xtrackers International Real Estate ETF (HAUZ), which seeks investment results that correspond generally to the performance of the iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index. iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index is a free-float capitalization-weighted index that provides exposure to publicly traded real estate securities in countries outside the United States, Pakistan, and Vietnam.
One more fund to look at is the 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.
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