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  • Alex Pettee, CFA

Apartment REITs: Happy Landlords, Unhappy Renters

  • No more "Free Rent." Renters will receive an unwelcome surprise with the next renewal offer as rents across the country are suddenly surging at the fastest rate in a half-decade.

  • The demographic and pandemic-driven boom in household formations has clashed with record-low housing supply to push housing costs higher across the ownership and rental markets.

  • The vaccine rollout has halted the "urban exodus" and stabilized rental rates in coastal markets. Sunbelt and suburban markets, meanwhile, are reporting record-high rates of rent growth.

  • After lagging in 2020, Apartment REITs have gained nearly 30% this year, boosted by a strong slate of Q1 earnings results with seven of ten apartment REITs raising their full-year earnings guidance.

  • Apartment REITs aren't the bargains that they were in late 2020, but valuations still appear compelling as rent growth "catches up" with home values amid a backdrop of persistently low housing supply and robust demand.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.