Residential REITs offer investors a safe option amid current volatility, with strong balance sheets, leasing tailwinds, and the continued shortage of affordable starter homes among the key factors supporting growth in the sector, says David Auerbach, managing director at Armada ETF Advisors.
Armada’s flagship product HAUS is an exchange traded fund (ETF) comprised of 25 pure play residential REITs in the multifamily, manufactured housing, single-family rental, and senior housing segments. It recently celebrated its one year anniversary of being a publicly traded entity.
Speaking to the Nareit REIT Report, Auerbach noted that most REITs in the residential sector were able to lock in attractive long-term debt and are well-capitalized to handle the current interest rate environment.
As for leasing and rent growth trends, Auerbach pointed to continued strength in many of the Sunbelt markets, while there are signs of residents returning to some of the coastal markets as well.
Meanwhile, many of the apartment REITs have talked about some of the tailwinds in leasing that they've experienced, Auerbach said. “If all goes well and all else remains equal, I wouldn't be shocked if we do see some small double digit (rental) increases in some of these markets,” he said.
Auerbach also discussed some of the key tailwinds he sees supporting the single family rental sector. One factor is that starter homes aren’t available anymore, especially in sought-after markets. “Until we see the home builders come out and deliver really a truly affordable product… it's going to benefit the single-family rental providers for a long period to come,” he said.
Manufactured housing is also likely to see continued demand as an affordable housing option and will continue to evolve alongside other segments of the residential REIT sector, Auerbach said.
