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Tuesday, April 9th, 2013
residential plus

13 0409 zREZ

Like other things that fit the “income plus momentum” theme, the iShares FTSE NAREIT Residential Plus Capped Index Fund (REZ) has been moving straight up of late.  In case you didn’t catch it in the middle of that eight-word name, the fund is the ETF for the residential portion of the FTSE NAREIT index series (PDF).

In the bottom panel of the chart is the total return on REZ since its inception.  Out of the gate, it dropped more than 60%.  From the bottom it has charged ahead 167%, for a net return of just over 42% from beginning to end.  (The chart is through last week; REZ tacked on 0.75% yesterday.)

The top panel shows the vacancy rate, which has plummeted since 2010, triggering a steady rise in rents (middle).

Following weak multifamily construction after the financial crisis, starts have rebounded strongly and vacancy rates should begin to increase in coming months, albeit slowly.

Will that changing dynamic alter the interest in REZ?  Or does the marginal (and/or margin) buyer right now even know about that or care about it?  (Chart:  Bloomberg terminal.)