Market Overview

Home Is Where The Heart Is With This New ETF

Home Is Where The Heart Is With This New ETF

At a weight of just 3.01 percent, the real estate sector is the second-smallest sector weight in the S&P 500, but the group is a popular destination for conservative income investors.

There are dozens of exchange traded funds tracking the real estate sector, reflecting investors' demand for access to this group, but many of these funds are prosaic in their approaches.

What Happened

Some newer real estate ETFs are offering refreshed avenues to the sector. That includes the Hoya Capital Housing ETF (NYSE: HOMZ), which debuted Wednesday. HOMZ was launched by an alumni of Georgetown University and one of his college professors. The new ETF tracks the Hoya Capital Housing 100 Index.

That benchmark is a rules-based index “designed to track the companies with the potential to benefit from rising rents, appreciating home values, and a persistent housing shortage,” according to Hoya Capital.

“We believe HOMZ has the potential to be the new barometer for the performance of the US housing sector,” said Hoya Capital President Alex Pettee, in a statement. “By offering representative exposure to transformative sectors like real estate technology, we believe that HOMZ provides a modernized and highly intuitive evolution in the homebuilding and real estate categories.”

Why It's Important

The underlying index for the new HOMZ has 100 components with a median market capitalization of $7.3 billion putting the index in mid-cap territory. Residential real estate investment trusts (REITs) and real estate operators represent 30 percent of the index as do homebuilders and materials makes associated with residential real estate construction.

Home improvement retailers and sellers of home furnishings and related fare have a 20 percent weight in the index. Mortgage lenders, property title firms and real estate technology companies also have a 20 percent weight in the index HOMZ follows.

“Housing is the single largest annual expenditure for the average American household, accounting for a third of average annual spending,” according to Hoya Capital. “Housing costs, as measured by the CPI inflation index, have outpaced average wage growth in every year since 2012, pushing traditional homeownership farther out of reach for millions of households.”

What's Next

HOMZ could be a complement to traditional REIT ETFs for investors looking to boost exposure to residential real estate. The widely followed Dow Jones U.S. Real Estate Index allocates just 13.80 percent of its weight to residential real estate.

HOMZ charges 0.45 percent per year, or $45 on a $10,000 investment.

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