Apartment stocks topping most other REITs sectors as tough housing market spurs demand for rentals

ALEX VEIGA
Updated ·3-min read

LOS ANGELES (AP) — Stocks in companies that own apartment buildings are holding up better than most other real estate investment trusts, as a tough U.S. housing market keeps demand for rental housing healthy and tenant turnover low.

The FTSE NAREIT Equity REITs index, which includes owners of apartments, office, retail and other commercial property types, is down 2.9% through the first five months of this year.

The 14-company apartment segment of the index, meanwhile, had a total return of 5.2% in the same period. One of the nation's largest apartment REITs, Virginia-based AvalonBay Communities, is up about 22% since last October. It owns and manages over 90,000 apartments across the U.S.

That performance trails only malls and health care property owners.

Still, apartments and REITs lag the S&P 500’s roughly 11.3% total return through the end of May.

A shortage of homes for sale and rising mortgage rates have combined to dampen home sales this spring, traditionally the busiest stretch for the housing market. Sales of previously occupied U.S. homes fell in March and April.

The median U.S. home sale price has risen more than 40% since 2019 alone, making it challenging for renters to save for down payments.

The resilience in apartment REITs stocks is noteworthy because it comes as landlords have seen rents fall nationally for nearly a year.

The median U.S. asking rent fell on an annual basis in April for the ninth month in a row to $1,723, according to data from Realtor.com drawn from the nation's 50 largest metropolitan areas. Despite the string of declines, April's figure was just 1.9% below its 2022 peak.

The largest wave of new apartment construction in at least 50 years is helping to put downward pressure on rents, but with many tenants priced out of homeownership, turnover is down, keeping demand healthy.

Meanwhile, a strong job market has helped drive rents higher in many metro areas, especially in the Midwest.

The median asking rent in the Indianapolis metro area jumped 4.5% in April to $1,334, while in Minneapolis it rose 2.5% to $1,529. It jumped 3.8% to $1,671 in Milwaukee.

Investors may want to focus on companies with properties in the West Coast and Midwest, which are expected to be less affected by the wave of new apartments than the Sunbelt, analysts at Raymond James & Associates wrote in a research note last month.

Discussing apartment REITs' first-quarter earnings reports, the analysts highlighted “the remarkable resilience of demand, which has steadily absorbed the well-known supply wave with minimal pricing dislocation."

They also noted that occupancy levels have held up better than expected and tenant turnover is “trending toward the lowest levels in sector history, as move-outs to homeownership have virtually dried up entirely.”

Among the analyst’s picks are Essex Property Trust and Centerspace, both of which have “Outperform” ratings.

  • Up next
  • Up next
  • Up next
  • Up next

Latest stories

  • Nvidia suffers biggest loss in world history after $646 billion bloodbath: 'This is a concern'

    After reaching incredible heights, concern is brewing for the AI and microchip company.

  • Young Aussie bucks cashless trend and reveals insane results: 'Gone through the roof'

    Matt Hey can't believe the impact using cash has had on his bank account.

  • $700 cost-of-living credit coming for millions from next week

    Millions of Aussies will be receiving an electricity bill rebate from next week. Here’s how to claim it.

  • A $100 Billion Bet on China’s Economy Sours as Warehouses Empty

    (Bloomberg) -- In many parts of China, the warehouses and industrial parks that used to be a magnet for international investors are grappling with a surprising slowdown in business activity. Most Read from BloombergYouTuber Dr Disrespect Was Allegedly Kicked Off Twitch for Messaging MinorVW Latches Onto Rivian in $5 Billion EV Pact to Regain MomentumTrump Could Actually Lose Florida. Here’s Why.Nvidia Rout Takes Breather as Traders Scour Charts for SupportJulian Assange Leaves Court ‘Free Man,’

  • I Want to Retire at 60. Will $300,000 in Savings Be Enough?

    The short answer to this question is, “Yes, provided you are prepared to accept a modest standard of living.” To get an an idea of what a 60-year-old individual with a $300,000 nest egg faces, our list of factors to check includes … Continue reading → The post Can I Retire at 60 With $300,000? appeared first on SmartAsset Blog.

  • Your rights when a new car keeps breaking down

    It has been back to Land Rover dealership six times for the same issue that has still not been resolved and the car is unusable as this issue is the hybrid system does not want to engage. After that, the onus is on the retailer - in this case the dealership, with whom Adam has a contract (not Jaguar Land Rover itself) - to prove the goods were not faulty when sold, and this onus lasts up to six months.

  • The Wealthiest Person in Singapore

    We recently compiled a list of the 30 Wealthiest People in Singapore and in this article, we will look at the richest person in Singapore. An Outlook of the Singaporean Economy According to the Ministry of Trade and Industry (MTI), the Singaporean economy rose at a more rapid pace than expected in Q1 2024. The GDP […]

  • I’m a Passive Income Enthusiast: 6 Methods That Are Making Me Rich

    Every wise finance article on the internet will share one common piece of advice: Don't put all your eggs in one basket when it comes to investing. Diversifying, according to experts, is one of...

  • India’s New Finance Hub in Gujarat Eyes Real-Time Dollar Settlement by 2025

    (Bloomberg) -- Real-time dollar settlement in India’s newest financial hub in Gujarat is likely to become operational later this year or by early 2025, according to a senior official, a step that could burnish the country’s appeal to foreign investors. Most Read from BloombergNvidia Rout Takes Breather as Traders Scour Charts for SupportBuzzFeed Struggles to Sell Owner of Hit YouTube Show ‘Hot Ones’Jain Global Raises $5.3 Billion, Secures Cash From Abu DhabiHow Long Can High Rates Last? Bond Mar

  • Aussie shares leap higher in rebound rally

    The Australian sharemarket notched a powerful rebound rally on Tuesday on the back of iron ore and oil price rises and a surge in banking behemoth Commonwealth Bank.

  • Bitcoin Posts Biggest Drop in Two Months as Liquidations Pick Up

    (Bloomberg) -- Losses are piling up in the crypto market after its second-worst weekly decline of 2024, a reflection of cooling demand for Bitcoin exchange-traded funds and uncertainty over monetary policy.Most Read from BloombergNvidia’s 13% Stock Rout Has Traders Scouring Charts for SupportBuzzFeed Struggles to Sell Owner of Hit YouTube Show ‘Hot Ones’Jain Global Raises $5.3 Billion, Secures Cash From Abu DhabiHow Long Can High Rates Last? Bond Markets Say Maybe ForeverWikileaks’ Julian Assang

  • What are family trusts?

    The use of family trusts in Australia is more widespread than many realise. How do they work, and why are they controversial?

  • I’m a Self-Made Millionaire: Here’s the Biggest Money Mistake I’ve Survived

    Reaching significant wealth is the kind of thing we all dream of -- especially when we're able to achieve it on our own. Read Next: I'm a Frugal Self-Made Millionaire: 6 Things I Never Waste Money On...

  • Coinbase shares are down about 13% over 2 weeks alongside tumbling Bitcoin

    The stock market has been losing confidence in the crypto exchange, as investors have sold $1.3 billion in spot Bitcoin ETF shares over the past two weeks.

  • Ralph Lauren (NYSE:RL) Is Paying Out A Larger Dividend Than Last Year

    The board of Ralph Lauren Corporation ( NYSE:RL ) has announced that it will be paying its dividend of $0.825 on the...

  • Yen Is Under Pressure Even as Japan Steps Up Its Verbal Warnings

    (Bloomberg) -- The yen remained under pressure even after Japan’s top currency official warned that authorities stand ready to intervene in currency markets 24 hours a day if necessary.Most Read from BloombergNvidia’s 13% Stock Rout Has Traders Scouring Charts for SupportBuzzFeed Struggles to Sell Owner of Hit YouTube Show ‘Hot Ones’Jain Global Raises $5.3 Billion, Secures Cash From Abu DhabiHow Long Can High Rates Last? Bond Markets Say Maybe ForeverWikileaks’ Julian Assange to Plead Guilty, En

  • Australia’s Faster Inflation Raises Risk of RBA Rate Hike

    (Bloomberg) -- Australia’s inflation accelerated faster than expected for a third straight month in May, sending the currency higher as traders boosted bets that the Reserve Bank will resume raising interest rates at its next meeting.Most Read from BloombergYouTuber Dr Disrespect Was Allegedly Kicked Off Twitch for Messaging MinorVW Latches Onto Rivian in $5 Billion EV Pact to Regain MomentumTrump Could Actually Lose Florida. Here’s Why.Nvidia Rout Takes Breather as Traders Scour Charts for Supp

  • Fed officials are talking down the chance of rate cut this year

    At the beginning of the year, Federal Reserve officials projected they would cut interest rates three times this year. By June, they had lowered that projection to just one cut.

  • I’m a Real Estate Expert: These Are 8 Cities Homebuyers Should Be Buying In Post-Pandemic

    With high interest rates, massive price increases (post-pandemic) and skyrocketing insurance costs, it's tough to be in the housing market right now. But poor affordability and higher costs have...

  • US dollar's dominance secure, BRICS see no progress on de-dollarization -report

    The U.S. dollar remains the world's primary reserve currency, and neither the euro nor the so-called BRICS countries have been able to reduce global reliance on the dollar, a new study by the Atlantic Council's GeoEconomics Center shows. The group's "Dollar Dominance Monitor" said the dollar continued to dominate foreign reserve holdings, trade invoicing, and currency transactions globally and its role as the primary global reserve currency was secure in the near and medium term. Dollar dominance — the outsized role of the U.S. dollar in the world economy — has been strengthened recently given the robust U.S. economy, tighter monetary policy and heightened geopolitical risks, even as economic fragmentation has strengthened a push by BRICS countries to shift into other international and reserve currencies.