Barron’s: 6 Apartment Stocks That Get a Rise Out of High Home Prices

July 19, 2022 by Kevin Kelly

Apartments are a critical component of the RESI Index , and the overall housing market, as housing is undergoing a seismic change due to demands and demographics.

Apartment constituents in the RESI index have unique competitive advantages of high-demand locations, industry-leading scale, and local management enhance ability to efficiently maximize the resident experience and Barron’s highlighted the current opportunity:

Skyrocketing home prices and mortgage rates make this a tough time to buy a house. But it’s an opportunity for bargain hunters to invest in apartment real estate investment trusts, which have been clobbered this year and are down about 20% despite surging rents […]

Apartment REITs are currently trading at a 21% discount to the value of their underlying assets, calculates Green Street, a commercial real estate analytics firm. As recently as a year ago, they were trading at a 3% discount […]

It isn’t surprising that apartment REITs have tumbled along with stocks and bonds this year in a broad market selloff. Real estate investments are sensitive to interest rates, which raise borrowing costs […]

But high rates are actually good news for apartment REITs, since they make buying a home more difficult. After a period of record-low mortgage rates, the 30-year fixed rate has nearly doubled to 5.51%. In May, the median existing-home sales price topped $400,000 for the first time, further straining affordability.

“There are some would-be buyers who are now pushed into the rentership pool,” says Haendel St. Juste, managing director and REITs analyst at Mizuho Securities. “The dramatic shift in the cost of homeownership is a net benefit for the rental side.”

The RESI Index has approximately 37% exposure to the REITs mentioned in the article:

  • AvalonBay Communities / AVB
  • Equity Residential / EQR
  • Camden Property Trust / CPT
  • Mid-America Apartment Communities / MAA
  • Apartment Income REIT / AIRC
  • UDR / UDR

Article can be found here: https://www.barrons.com/articles/apartment-reits-stocks-home-prices-mortgage-rates-51657819229

It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. Strategic Investments does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. Strategic Investments licenses its indices to third parties for the creation of investment funds or other vehicles, such as exchange-traded funds (ETFs), exchange-traded notes (ETNs), institutional asset mandates, and structured notes.

The information contained does not reflect the performance of any fund or account managed or serviced by Strategic Investments, and there is no guarantee that investors will experience the type of performance reflected above. There is no guarantee that any historical trend illustrated herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any market forecast made in this commentary will be realized. The mention of specific securities is not a recommendation or solicitation for any person to buy, sell or hold any particular security and should not be relied upon as investment advice. The views and opinions in the preceding commentary are as of the date of publication and are subject to change without notice. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice, is not intended to predict or depict performance of any investment and does not constitute a recommendation or an offer for a particular security. We consider the information in this presentation to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of suitability for investment.