Despite numerous potential headwinds, the U.S housing market keeps chugging along. Home prices and sales continue to rise while the inventory of homes remains tight, helping to offset the impact of rising mortgage rates. This means it’s still a good time to invest in residential real estate even if you can’t afford to buy a home.
If you wonder why you should consider investing in housing right now, here are a few reasons:
- The average home value in the United States stood at $346,270 at the end of May, according to Zillow — up 2% from the previous year. The average time for a home to be listed as “pending” is around 11 days, meaning sales contingencies have already been met and the buyer is preparing to close on the property.
- Sales of new homes in May rose 12.2% from the previous month, CNBC reported, citing U.S. Commerce Department data. That’s the highest level since February 2022.
- Home prices in April climbed 0.5% month-over-month, according to the S&P CoreLogic Case-Shiller national home price index — the third straight month of increases.
Meanwhile, consumer confidence improved more than expected in June, CNBC noted, reaching its highest point since January 2022. As The New York Times reported, the shift to remote work during the pandemic has further propped up the housing market because it gave consumers greater latitude to buy homes in affordable markets.
“Remote work means working from home for a lot of people,” Adam Ozimek, chief economist at the Economic Innovation Group, told the NTY. “That really increases the value of space.”
Investing in the resilient U.S. housing market doesn’t require buying a home yourself. Here are five other options that can help you grow your wealth:
Investing in a real estate investment trust (REIT) lets you gain exposure to the housing market without having to put up a big amount of cash to purchase a property. And with a residential REIT, you don’t need to take out a mortgage loan.
REITs are investment vehicles made up of financial contributions from numerous investors, with each contributing a certain amount of money, according to Rocket Mortgage. The REIT then uses this money to purchase real estate. A residential REIT differs from a standard commercial REIT because it’s only used to purchase residential properties. Residential REITs typically invest in single-family homes, student housing, apartment buildings, manufactured housing, condominiums and townhomes.
Home Builder Stocks
Buying shares of publicly traded home builders is a good way to take advantage of an expected uptick in construction as the U.S. housing market addresses its inventory shortage. Leading home builder stocks include LGI Homes (ticker: LGIH), KB Home (KBH), Lennar (LEN), D.R. Horton (DHI), Pulte Homes (PHM) and Toll Bros.
Construction Equipment Stocks
As with home builder stocks, construction equipment stocks do well when there is high demand for new residential communities (and surrounding infrastructure). The two big players in construction equipment are Caterpillar (CAT) and Deere & Company (DE).
As CNBC noted, shares of toolmaker Stanley Black & Decker (SWK) also do well when there is a bustling market for home construction and renovation. Another stock that might make a good housing investment is Eagle Materials (EXP), which produces building materials such as concrete, cement, gypsum, wallboard and paperboard.
Home Construction Funds
If you’d rather gain exposure to home construction through funds rather than individual stocks, several exchange-traded funds are available that specialize in the Building & Construction category. The ETF Database website lists four of them: iShares U.S. Home Construction ETF (ITB), SPDR S&P Homebuilders ETF (XHB), First Trust RBA American Industrial Renaissance ETF (AIRR), and Invesco Dynamic Building & Construction ETF (PKB).
Home Goods/Renovation Retailers
In terms of publicly traded companies, the two main players in home construction/renovation retail are Home Depot (HD) and Lowe’s (LOW). TJX Companies’ (TJX) HomeGoods chain also stands to benefit from the resilient housing market, CNBC reported — especially since rival Bed Bath & Beyond recently went bankrupt.
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