Rising borrowing rates have coincided with the busiest season for home buying as many families scramble to get settled into new homes before the new school year.
The average rate on a 30-year fixed-rate mortgage climbed from 3.22% in early January to 5% as of last week, according to Freddie Mac. Mortgage rates are rising at their fastest pace in 35 years, the Wall Street Journal reports, making home purchases much more expensive than they were even a few months ago.
Record-high home prices and record-low inventory of homes over the past two years have fostered intense demand and kept activity at historically strong levels.
As demand looks to be resilient in the face of rising borrowing rates, investors are gaining exposure to real estate investing through the advantageous ETF structure.
REIT preferreds tend to offer attractive yield potential, both fixed income and equity characteristics, and low equity beta. These securities are also typically exposed to less leverage, with generally more predictable revenue streams than those issued by banks and insurance companies, according to the firm.
PFFR tracks an index made of U.S.-listed preferred securities issued by REITs. All securities are screened so that only those with a yield-to-worst of 3% or higher are eligible to be included in PFFR. The fund is market cap-weighted and limits any single issue to a 10% weighting, according to ETF Database.
By opting for a REIT ETF investment, as opposed to purchasing individual REITs, investors can gain exposure to the real estate market that is better diversified and has fewer transactions.
As an added benefit, investing through ETFs provides enhanced liquidity compared to investments in individual REITs.
For more news, information, and strategy, visit the Alternatives Channel.