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:

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