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March 21, 2019, 11:03 a.m. EDT

Want to profit from the housing shortage? There’s a new ETF for that.

Is a broader ‘proxy’ for investing in the housing market - or a narrower one - better?

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By Andrea Riquier


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A Texas neighborhood: looking for a broader way to invest in real estate than just buying individual houses?

The rent is too damn high and there aren’t any houses to buy, but all is not lost. Thanks to a new exchange-traded fund, investors may soon be able to profit from the housing shortage crisis.

HOMZ /zigman2/quotes/203278229/composite HOMZ +0.24%   , which will trade on the New York Stock Exchange starting Wednesday, tracks an index created by its parent company, Hoya Capital . The index is “designed to be the new barometer for the U.S. Housing Sector,” Hoya says in its promotional materials.

There are other ETFs tracking housing and some mutual funds, as well. But Hoya President Alex Pettee calls HOMZ the first “to track the entire housing market,” by including stocks of companies ranging from home builders to data services to real estate investment trusts.

The Housing 100 index tracks spending on housing according to its contributions to GDP spending. Hoya selected companies that “accurately represented this spending,” Pettee said, emphasizing not just homebuilding stalwarts like Lennar /zigman2/quotes/202536373/composite LEN +1.11%   and D.R. Horton Inc. /zigman2/quotes/202032328/composite DHI +1.27%  , but “companies that are transforming real estate” like CoreLogic /zigman2/quotes/210311059/composite CLGX -0.55%   and Zillow /zigman2/quotes/205077794/composite ZG -0.88%  . “The ETF is a proxy on the housing market.”

Related: The new housing play: helping priced-out renters become long-distance landlords

More specifically, though, these are also companies that are poised to benefit from the lingering housing shortage, which has worsened into what most analysts consider a crisis. Economists at Freddie Mac have estimated that the U.S. has a shortfall of several million homes , and as more new households are formed, that will likely only intensify.

“The ETF graveyard is littered with interesting-sounding strategies.”

Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA

“This is taking the thematic investing theme to the next level,” said Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA. The two current housing ETF kings, SPDR S&P Homebuilders /zigman2/quotes/202739297/composite XHB -0.26%   and the iShares U.S. Home Construction ETF /zigman2/quotes/203468436/composite ITB +0.55%  , each have a lot more than homebuilder stocks in them, Rosenbluth noted.

But HOMZ is much broader, and resembles many newer ETFs that are pivoting off an idea rather than making a pure industry play. One consequence: it will almost certainly be far less volatile than the homebuilder biggies, thanks to its inclusion of REIT stocks, Rosenbluth pointed out.

See also: ‘So remarkably inefficient’: Venture capital takes on the housing market

“I think the theme makes sense,” Rosenbluth said. “Whether the investment case backs it up, or if investors are interested in a broader approach versus the existing home builder products or a narrower approach to playing housing, I’m not sure. The ETF graveyard is littered with interesting-sounding strategies.”

Still, Pettee argues that the housing supply shortage is likely to have clear investment impacts. It will help boost rental rates, which should benefit rental operators like AvalonBay Communities, Inc. /zigman2/quotes/201241431/composite AVB -0.01%   and American Homes 4 Rent /zigman2/quotes/200033718/composite AMH +0.23%  .

It will keep demand elevated for new homes built by Lennar /zigman2/quotes/202536373/composite LEN +1.11%   and Masco /zigman2/quotes/202412472/composite MAS -0.82%  .

Consumers will continue to use Zillow to look for homes and Fidelity National Financial /zigman2/quotes/207569682/composite FNF +0.62%   for “back-office” needs like title insurance and mortgage servicing.

And as the housing stock ages, Americans will have to invest not just in new curtains at Wayfair /zigman2/quotes/201071690/composite W +3.78%  , but new water heaters and roofs at Lowes /zigman2/quotes/205563664/composite LOW +1.37%   and Home Depot /zigman2/quotes/208081807/composite HD +1.05%  .

Read: Help wanted: Home builders need women, immigrants and robots to fill shortage

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US : U.S.: NYSE Arca
$ 29.08
+0.07 +0.24%
Volume: 4,927
Dec. 9, 2019 8:00p
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/zigman2/quotes/202536373/composite
US : U.S.: NYSE
$ 59.40
+0.65 +1.11%
Volume: 2.10M
Dec. 9, 2019 6:30p
P/E Ratio
9.83
Dividend Yield
0.27%
Market Cap
$18.66 billion
Rev. per Employee
$1.77M
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/zigman2/quotes/202032328/composite
US : U.S.: NYSE
$ 54.89
+0.69 +1.27%
Volume: 3.00M
Dec. 9, 2019 6:30p
P/E Ratio
12.78
Dividend Yield
1.28%
Market Cap
$19.97 billion
Rev. per Employee
$1.93M
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/zigman2/quotes/210311059/composite
US : U.S.: NYSE
$ 41.70
-0.23 -0.55%
Volume: 876,765
Dec. 9, 2019 6:30p
P/E Ratio
106.08
Dividend Yield
N/A
Market Cap
$3.33 billion
Rev. per Employee
$308,341
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/zigman2/quotes/205077794/composite
US : U.S.: Nasdaq
$ 40.35
-0.36 -0.88%
Volume: 402,289
Dec. 9, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$8.45 billion
Rev. per Employee
$307,554
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/zigman2/quotes/202739297/composite
US : U.S.: NYSE Arca
$ 45.87
-0.12 -0.26%
Volume: 1.21M
Dec. 9, 2019 8:00p
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/zigman2/quotes/203468436/composite
US : U.S.: Cboe BZX
$ 45.56
+0.25 +0.55%
Volume: 1.31M
Dec. 9, 2019 4:10p
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/zigman2/quotes/201241431/composite
US : U.S.: NYSE
$ 215.91
-0.03 -0.01%
Volume: 396,205
Dec. 9, 2019 6:30p
P/E Ratio
29.90
Dividend Yield
2.82%
Market Cap
$30.16 billion
Rev. per Employee
$738,060
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/zigman2/quotes/200033718/composite
US : U.S.: NYSE
$ 26.41
+0.06 +0.23%
Volume: 1.24M
Dec. 9, 2019 6:30p
P/E Ratio
98.99
Dividend Yield
0.76%
Market Cap
$7.92 billion
Rev. per Employee
$869,412
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/zigman2/quotes/202536373/composite
US : U.S.: NYSE
$ 59.40
+0.65 +1.11%
Volume: 2.10M
Dec. 9, 2019 6:30p
P/E Ratio
9.83
Dividend Yield
0.27%
Market Cap
$18.66 billion
Rev. per Employee
$1.77M
loading...
/zigman2/quotes/202412472/composite
US : U.S.: NYSE
$ 45.98
-0.38 -0.82%
Volume: 2.03M
Dec. 9, 2019 6:30p
P/E Ratio
18.18
Dividend Yield
1.17%
Market Cap
$13.17 billion
Rev. per Employee
$321,500
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/zigman2/quotes/207569682/composite
US : U.S.: NYSE
$ 47.42
+0.29 +0.62%
Volume: 1.34M
Dec. 9, 2019 6:30p
P/E Ratio
17.15
Dividend Yield
2.78%
Market Cap
$12.96 billion
Rev. per Employee
$324,117
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/zigman2/quotes/201071690/composite
US : U.S.: NYSE
$ 88.18
+3.21 +3.78%
Volume: 2.24M
Dec. 9, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$7.91 billion
Rev. per Employee
$559,153
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/zigman2/quotes/205563664/composite
US : U.S.: NYSE
$ 117.87
+1.59 +1.37%
Volume: 2.63M
Dec. 9, 2019 6:30p
P/E Ratio
31.18
Dividend Yield
1.87%
Market Cap
$89.13 billion
Rev. per Employee
$230,029
loading...
/zigman2/quotes/208081807/composite
US : U.S.: NYSE
$ 216.53
+2.25 +1.05%
Volume: 5.15M
Dec. 9, 2019 6:30p
P/E Ratio
21.52
Dividend Yield
2.51%
Market Cap
$233.74 billion
Rev. per Employee
$261,993
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Andrea Riquier reports on housing and banking from MarketWatch's New York newsroom. Follow her on Twitter @ARiquier.

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