With the national average for the 30-year fixed-rate mortgage being about 6.43%, many homebuyers can no longer afford the down payment and interest that comes with buying a home. Unfortunately, due to the scorching real estate market, the average home price in the US is around $356,054, which caused rents to rise 12.3% at the end of August.
With a typical monthly rent of $2,090, real estate mutual funds will continue to have an inflation advantage in the condominium and single-family home markets.
These three apartment and single-family home REITs could prove to be cash generators for years to come as the housing market experiences a bit of a supply crunch.
AvalonBay Communities Inc. AVB offers a dividend yield of 3.46%, or $6.36 per share annually through quarterly payments, with a mixed track record of growing its dividends. AvalonBay Communities is focused on owning large, quality properties in major metropolitan areas including the Pacific Northwest, New England and New York. The Company owns a portfolio of 299 communities with over 89,037 units in 12 states and has 19 additional properties under development beginning in 2022.
AvalonBay has posted 5% annual dividend growth since its IPO and is the 12th-largest publicly traded REIT.
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Essex Property Trust Inc. ESS offers a dividend yield of 3.65%, or $8.80 per share annually using quarterly payments, with an aristocratic track record of increasing its dividends for 27 consecutive years. The Essex Property Trust is focused on owning large, quality West Coast properties in the urban and suburban sub-markets with a total portfolio of 253 condominiums comprising over 62,000 units and developing a further three properties comprising 571 units from 2022.
During the second quarter of 2022, Essex Property repurchased 218,960 common shares for a total of $60.8 million, including commissions, at an average price of $277.81 per share. As of June 30, 2022, the Company had $153.6 million of purchase authority under the stock repurchase plan.
Invitation Homes Inc. INVH offers a dividend yield of 2.59%, or 88 cents per share annually, makes quarterly payments, and has a decent track record of growing its dividends over four years. Invitation Homes’ portfolio is spread across 16 target markets with strong employment and household growth, with nearly 70% of the portfolio located in the western US and Florida.
Invitation Homes owns a portfolio of over 82,000 single family rental homes (as of 2022) and is focused on owning homes in the starter and intermediate segments of the housing market with an average selling price of approximately $300,000 and generally less than 1,800 square feet.
Total revenue for Invitation Homes increased 13.4% year over year to $557 million, while property operating and maintenance expenses increased 8.7% to $191 million and net income per diluted common share increased 71.2% % rose to $0.18.