High demand and low supply are feeding into higher home prices despite the challenges of the Covid-19 pandemic. Compared to two years ago, home prices have jumped 5.5% during the month of July.
“Nationally, home prices in July were 5.5% higher than in 2019. That is a marked increase from the 4.3% annual gain seen in June, according to CoreLogic,” a CNBC article noted.
In addition, low rates are offering prospective homeowners access to financing with cheap money. As the shift in real estate focuses on work-from-home employees, more homeowners are looking to expand their square footage.
“Falling mortgage rates helped bolster the pent-up demand from spring when home sales ground to a halt due to the start of the coronavirus pandemic,” the CNBC article added. “The average rate on the popular 30-year fixed fell below 3% for the first time even in July, giving buyers additional purchasing power.”
“Lower-priced homes are sought after and have had faster annual price growth than luxury homes,” said Frank Nothaft, CoreLogic’s chief economist. “First-time buyers and investors are actively seeking lower-priced homes, and that segment of the housing market is in particularly short supply.”
Exchange-traded fund (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.
For more market trends, visit the ETF Trends.