The real estate market shows promise with rising home sales, moderating mortgage rates, increasing inventory, demographic-driven demand, and stable price growth. Economic stability, urban renewal, and growing homeownership wealth might further enhance its attractiveness for investment in the coming years.
Hence, investors seeking to diversify their portfolio can consider strong REIT ETFs like iShares U.S. Real Estate ETF (IYR), Schwab U.S. REIT ETF (SCHH), and Vanguard Real Estate Index Fund ETF Shares (VNQ).
The real estate market is attractive due to its diversification benefits, offering uncorrelated investments that reduce overall risk. It allows further diversification across various markets and investment types, such as rental properties, fix-and-flips, and REITs. Notably, post-election clarity and expected improvements in job growth are creating a favorable environment for real estate investments.
Meanwhile, existing home sales are projected to increase by 9% in 2025 and 13% in 2026, while new home sales may rise by 11% in 2025 and 8% in 2026, driven by improved job growth and economic stability. Although mortgage rates remain high, they are expected to stabilize at the lower end of recent ranges, making the housing market more predictable for buyers and sellers.
Furthermore, real estate offers stable cash flow, tax benefits, equity building, competitive returns, inflation protection, and leverage opportunities, making it a reliable and tangible investment option for wealth creation and portfolio enhancement. Given these trends, let’s evaluate the fundamentals of the three real estate ETFs, starting with number three.
ETF #3: iShares U.S. Real Estate ETF (IYR)
IYR is an exchange-traded fund launched by BlackRock, Inc. and managed by BlackRock Fund Advisors. The fund invests in the public equity markets of the United States, focusing on stocks of companies operating across the real estate sector. It includes growth and value stocks of companies across diversified market capitalizations. The fund seeks to track the performance of the Dow Jones U.S. Real Estate Capped Index using a representative sampling technique.
With $5 billion in assets under management (AUM), IYR’s top holding is Prologis, Inc. (PLD) with a 7.69% weighting, followed by American Tower Corporation (AMT), with a 6.89% weighting, and Equinix, Inc. (EQIX), with 6.56%. It has a total of 66 holdings.
It has an expense ratio of 0.39%, lower than the category average of 0.41%. It currently has a NAV of $102.26. Moreover, IYR’s fund inflows came in at $1.40 billion over the past year.
The fund’s annual dividend of $2.36 yields 2.31% on the current share price. Its four-year average yield is 2.59%. Also, its dividend payouts have increased at a CAGR of 8.3% over the past three years.
IYR has gained 22.4% over the past six months and 22.2% over the past year to close the last trading session at $102.55.
IYR’s POWR Ratings reflect this promising outlook. IYR’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
IYR has an A grade for Buy & Hold and Trade. Of the 31 ETFs in the A-rated Real Estate ETFs group, it is ranked #4. Click here to access all of SRET’s POWR Ratings.
ETF #2: Schwab U.S. REIT ETF (SCHH)
SCHH is an exchange-traded fund launched and managed by Charles Schwab Investment Management, Inc. The fund invests in the public equity markets of the United States. It invests in stocks of companies operating across various real estate and REIT sectors. It invests in growth and value stocks of companies across diversified market capitalizations. The fund seeks to track the performance of the Dow Jones Equity All REIT Capped Index by using the full replication technique.
With $8.12 billion in assets under management (AUM), SCHH’s top holding is PLD with a 7.55% weighting, followed by AMT, with a 6.82% weighting, and EQIX, with 6.52%. SCHH has a total of 120 holdings.
SCHH has an expense ratio of 0.07%, lower than the category average of 0.41%. It currently has a NAV of $23.13. Its fund inflows came in at $741.29 million over the past year.
The ETF pays an annual dividend of $0.66, which yields 2.86% on the current price. SCHH has a four-year average dividend yield of 2.63%. SCHH’s dividend payouts have increased at a CAGR of 11.8% over the past three years.
SCHH has gained 21.4% over the past year and 21.5% over the past six months to close the last trading session at $23.13.
SCHH’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.
SCHH has an A grade for Buy & Hold and Trade. In the same group, it is ranked #2. Click here to access all of SCHH’s POWR Ratings.
ETF #1: Vanguard Real Estate Index Fund ETF Shares (VNQ)
VNQ is an exchange-traded fund launched and managed by The Vanguard Group, Inc. It invests in the public equity markets of the United States, focusing on stocks of companies operating in the real estate and equity real estate investment trust (REIT) sectors. It includes growth and value stocks of companies across diversified market capitalizations. The fund seeks to track the performance of the MSCI US Investable Market Real Estate 25/50 Index using a full replication technique.
With $37.59 billion in AUM, the fund has a total of 155 holdings. VNQ’s top holding is PLD with a 6.91% weighting, followed by AMT, with a 6.59% weighting, and EQIX, with 5.56%. The fund has a total of 155 holdings.
VNQ has an expense ratio of 0.12%, lower than the category average of 0.41%. It currently has a NAV of $98.04. Its fund inflows came in at $179.62 million over the past year.
The fund’s annual dividend of $3.65 yields 3.71% on the current share price. Its four-year average yield is 3.67%. Its dividend payouts have increased at a CAGR of 3.9% over the past three years.
VNQ has gained 21.5% over the past year and 22.4% over the past six months to close the last trading session at $98.55.
VNQ’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold and Trade. It is ranked first in the Real Estate ETFs group. To access all the POWR Ratings for VNQ, click here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
VNQ shares were trading at $96.93 per share on Monday morning, down $1.23 (-1.25%). Year-to-date, VNQ has gained 12.96%, versus a 28.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
3 Real Estate ETFs to Diversify Your Investment Portfolio StockNews.com
