This morning, Investors’ Business Daily had a follow on story updating happenings in the residential real estate space for rental apartments. REITs continue to see increased rents and falling vacancy rates. I continue to like the ETF REZ as a good vehicle to play this encouraging news in the apartment segment. I’m showing the current Marketclub 1-year chart below. The long term trend indicated by a green monthly trade triangle started on June 1st 2009, during which time the ETF has risen from $23.11 to over $40.00 today. All the news looks good for REZ, I am long this investment myself.
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With the news replete with stories of an increasing foreclosure mess in residential real estate you may be wondering if poor old Humpage has finally gone off the deep end. But bear with me on this.
Investors Business Daily had a very interesting article about major U.S. apartment markets today, and quite the bullish tone it had, too. Landlords are looking for greater than 10% revenue growth this year in some cities. Supply and demand has entered the equation again and apparently there just aren’t enough apartments to go around.
Days before reading this article I had purchased the Vanguard REIT ETF (VNQ) which had a one year upside of 28.37% in 2010. But to match the story in this article I looked around for an ETF with more residential exposure. The best I could come up with is the iShares FTSE NAREIT Residential Plus Capped Index Fund (REZ). Theis ETF, which has just shy of 50% of its holdings in residential apartment equity (the remainder is in healthcare and self-storage) returned 31.69% in 2010. So, as the chart shows, the performance of these two REITs is pretty close:
As I’m long VNQ you won’t be surprised to hear me tell you that I think it’s a great all-around REIT choice. But, if you want profit from the recovery in rental apartment rents, REZ might be worth a very close look too.
DISCLOSURE: Long VNQ. Looking for an entry on REZ.