Why to Home In on 'HOMZ,' a Fresh Take on Real Estate

Real estate is a sector conducive to fresh, newer approaches and the Hoya Capital Housing ETF (HOMZ) is answering that bell.

HOMZ tracks the Hoya Capital Housing 100 Index, a rules-based index composed of the 100 companies that collectively represent the performance of the US Housing Industry. According to Hoya Capital, the ETF is designed to track total spending on housing and housing-related services. The underlying index is composed of four US Housing Industry Business Segments, each weighted based on their relative contribution to US Gross Domestic Product.

Hoya Capital Real Estate, a research-focused investment advisor specializing in real estate securities, launched HOMZ about two years ago, making it the first ETF to offer diversified exposure across the entire US housing sector. The fund has grown an impressive 130% the past year alone.

HOMZ 1 Year Total Return

HOMZ “provides investors with broad exposure to the U.S. housing industry. In this ETF review, we will take a look at HOMZ’s fundamentals, compare it to similar ETFs, and determine if this relatively new ETF offering is an appropriate choice for real estate investors,” writes Seeking Alpha.

The Case for Innovation in Real Estate

Data underpin the ascent of HOMZ this year. Case and point: home prices are at record highs.

Lower mortgage rates could continue to give the housing market a much-needed boost, which could translate to more strength for homebuilders. Rising rates, low affordability, and rising homebuilder costs due to tariffs have been problematic for the sector in recent times.

“HOMZ appeared to have closely mirrored the returns of the comparison homebuilder and construction-related ETFs. When considering the first comparison chart to the REIT ETFs, it would appear that HOMZ’s roughly 1/3 portfolio allocation to REITs may have been to blame for the slight drag in the post-March 2020 recovery,” notes Seeking Alpha.

More so than traditional real estate ETFs, HOMZ is levered to the residential real estate ecosystem. Home improvement companies and homebuilder-related ETFs could find support from homeowners who are willing to reinvest in their own homes. Additionally, the inverted yield curve doesn’t yet appear to be taking a toll on homebuilder equities.

HOMZ features exposure to industries that usually aren’t found in traditional real estate ETFs, including mortgage and title companies, mobile home manufacturers, single-family rental operators, apartment firms, and real estate technology providers.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.