HH The REIT Special - An Inflation Hedge

Multifamily or residential REITs own and operate apartment buildings and/or manufactured housing.

The most important factors to focus on when researching multifamily REITs are affordability, population growth, and job growth. For example, large cities such as New York and LA have higher living costs and more renters. But their job growth and population growth are severely lagging right now. You want large urban centers that show strong in-migration trends and job growth.

Figure 2: Marcus & Millichap Forecast

Consider the multifamily market in the Sunbelt and Mountain region. Even before COVID, there was a migration boom and significant employment growth, especially in the Sunbelt region. Plus, this region didn’t lock down as strictly as big cities like New York and LA and saw fewer job losses during the pandemic.

The Mountain region is also seeing a rapidly growing population, a strong quality-of-life, and affordable living costs. Do you know the ONLY state that saw year-over-year job growth for total nonfarm payrolls in January 2021 while also leading in year-to-date growth? Idaho.

While multifamily growth will be likely be fragmented based on region, there are two ways you can play this:

  1. Research individual REITs with the most exposure to growing regions.
  2. Add broad-based exposure to multifamily assets through ETFs like the iShares Residential Real Estate ETF (REZ). While this ETF does not focus EXCLUSIVELY on residential REITs, as it has exposure to healthcare and self-storage, too, this is an easy and convenient way to give yourself multifamily exposure.
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Disclaimer: All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be ...

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