A Rising Star Among REIT ETFs

Thanks in large part to declining Treasury yields, real estate investment trusts and the related exchange traded funds have been performing well this year.

What Happened

Income-starved investors have been leaning on traditional REIT ETFs for bond-like qualities and above-average yields, but some newcomers to the crowded REIT ETF fray merit consideration. That includes the Hoya Capital Housing ETF HOMZ.

HOMZ, which debuted late in the first quarter, follows the Hoya Capital Housing 100 Index, meaning the fund is one of the few REIT ETFs that actually focuses on residential real estate, something Americans spend roughly a third or more of their income on.

HOMZ houses 100 companies across four industries: homebuilders, residential REITs, home improvement and furnishings retailers and, in a novel twist among REIT ETFs, financial and fintech companies with exposure to the residential real estate ecosystem.

Why It's Important

“We believe that HOMZ captures the compelling thematic growth trends of the US Housing Industry over the next decade including the recovery in new home construction, the realization of deferred home improvement spending, and the effects of the mounting housing shortage, which has resulted in rising rents and a growing share of spending towards housing,” Hoya Capital said in a recent note.

The breath of fresh air approach offered by HOMZ is working as the fund has returned more than 15% since inception and nearly 5% since the start of the fourth quarter.

“HOMZ breaks through the traditional classification lines in the real estate and homebuilding categories, investing in all segments of the residential real estate industry while avoiding the potentially at-risk real estate sectors like malls and shopping centers,” according to Hoya Capital.

What's Next

HOMZ may have its more traditional rivals beat in another important department: leverage to the broad swath of millennials entering the housing market or those that are close to doing so.

“Millennials - the largest generation in American history - are coming full-steam into the housing markets over the next decade amid this period of historically low housing supply,” Hoyal Capital said. “Harvard University's Joint Center for Housing Studies (JCHS) projects that annual household growth from 2018-2028 will average 1.2 million households per year, which is 20% higher than the prior 5-year average.”

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