iREIT Daily

The Rental Market Gets Raucous

Brad Thomas

467 postsJune 28, 2022

For two years now, the housing market has endured one of the most insane buying cycles on record. As Covid-19 and the shutdowns reshaped… well… everything… and $5 trillion was injected into the economy, millions of Americans rushed into the real estate market.

Now, after months of record-high home prices, bidding wars, and inventory shortages, even the rental market is feeling the effects.

Cities like New York and Chicago might have suffered in the beginning in that regard. But that’s no more. And hot housing market conditions have trickled into the rental realm.

The Wall Street Journal reports:

“Bidding wars have long been a staple of hot housing markets, where buyers compete with offers above the seller’s listing price. Now these contests are becoming more commonplace in the rental market. Real-estate agents from New York to Chicago and Atlanta say they see more people than ever making offers above asking to lease homes and apartments that they will never own.
“An increasing number of white-collar professionals – some of whom recently sold homes – are reluctant to buy because of record-high home prices, rising mortgage rates, and limited supply. They are renting instead, helping to drive a frenzy for leased properties of all kinds and helping fuel the trend of offering above asking rents, real-estate agents said.”

Alrighty then!

With so much demand in the rental realm, landlords are actually finding it difficult to keep up. They’re petitioning for higher rates even in areas with rent control.

Just last week, a panel in New York City passed a rental increase of 3.25% for next year – the highest hike in nearly a decade.

Mark my words: If it hasn’t started happening already, areas unprotected by stabilization policies will see rental prices skyrocket. And even with unprecedented increases, the bidding wars are expected to continue.

According to data from real estate resource Redfin, average rental prices have exceeded $2,000 for the first time ever… rising 15% over the past year. Which might be just the beginning.

As the Fed continues its campaign to increase interest rates, construction companies will likely build fewer homes. Because fewer people can afford a new home when borrowing rates balloon.

Again, this all means gains for landlords, but that’s only guaranteed in the short-term. The looming long-term effects are unknown since we have to wonder about sustainability.

How long can the American consumer endure these incredibly high rates? Will they be just one more factor that pushes us into a recession?

In which case, join the club.

More Non-REIT News to Know About

There are so many strange aspects of this economy that it’s sometimes hard to keep up with it all.

For instance, remember how earnings reports from top retail giants suggested that American consumer strength was weaking? Well, new data is out to indicate otherwise.

According to the Commerce Department, orders for durable goods rose significantly last month. And according to the National Association of Realtors, the number of houses under contract rose significantly too.

This signals continued demand even in a slow-growing economy.

Orders for discretionary items rose 0.7% last month, driven by big-ticket items like cars and computers. So did the pending home sales index, a gauge of contract signings.

All put together, it seems the Fed’s efforts to curb demand have had little effect so far. This could mean we’re in store for even more aggressive action on its part.

Then again, as I said earlier, there are so many strange aspects of this economy. It’s going to play out how it plays out, and to a large degree, we’re just along for the ride.

The World According to REITs

Going back to the on-fire rental market, let’s discuss some apartment real estate investment trusts (REITs) today.

I’m absolutely not saying to frontload your portfolio with them just because they’re in such a sweet spot right now. But there are a couple of picks with strong fundamentals, growth, and balance sheets.

As always, just make sure that they work for you and that you purchase them at attractive entry points.

Independence Realty Trust (IRT) specializes in older or non-luxury Class B apartments in secondary and suburban submarkets. Last year, it more than doubled its portfolio and extended exposure to the ever-growing Sunbelt region by acquiring Steadfast Apartments.

Because of its focus, it’s not exactly at the forefront of the rental wars. But it does boast a 95% occupancy with 12% year-over-year growth for lease renewals.

By serving middle-class suburbanites in some of the country’s fastest-growing regions, IRT benefits from consistency, steady growth, and reliable renters. So it could be a lucrative long-term pick for more conservative portfolios.

Take a drive through any growing city or suburb, and you’re going to see a Camden complex at some point. Camden Property Trust (CPT) is one of the most iconic multifamily REITs the world has to offer.

The company owns 171 apartment communities with 58,588 apartment homes in the U.S. It’s been in operation since the early ‘80s and is ranked eighth by Fortune on its list of “Best Companies to Work For.”

This blue-chip REIT also diversifies across both big cities and small towns alike. And it does it well too.

With 11% year-over-year growth in the first quarter, it seems like it has what it takes to thrive in any environment. At least the environments we’ve seen so far.

Happy Investing

Brad Thomas

467 posts

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Brad Thomas is Senior Research Analyst at iREIT and CEO of Wide Moat Research LLC. With over 30 years of real estate experience, he is also long-time Editor of Forbes Real Estate Investor, a monthly subscription-based newsletter that dives deep into the vast world of profitable properties, and since 2021, he has served as an adjunct professor at New York University.

Thomas has also been featured on or in Forbes magazine, Kiplinger's, U.S. News and World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. And he was the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 based on both page views and number of followers.

Thomas is the recently-published author of The Intelligent REIT Investor Guide (2021), co-author of The Intelligent REIT Investor (2016), and he wrote The Trump Factor: Unlocking The Secrets Behind The Trump Empire (2016) - all available on Amazon.

Thomas received a bachelor of science in business/economics from Presbyterian College and is married with five wonderful kids.

Everyone’s Dependent on China, and That’s a Problem

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

The Rental Market Gets Raucous

Brad Thomas

467 postsJune 28, 2022

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The Rental Market Gets Raucous

467 postsJune 28, 2022

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