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Three Housing Market ETFs to Consider Now

Ruchi Gupta - Author
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Jul. 22 2022, Published 6:40 a.m. ET

As interest rates rise, people are wondering whether investing in the housing market is a good idea. Because it's more expensive to obtain a mortgage, the profit opportunity from buying and selling properties may diminish. As a result, you may want to focus on real estate funds instead. What are the best housing market ETFs to consider now?

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In the property market, you can make a killing from purchasing homes, improving them, and then putting them back on the market. However, this isn't always the case—the housing sector goes through periods of boom and bust.

Real estate stocks may provide the shelter you need

Even in a housing market boom, you’d need a huge amount of capital to buy properties and sell them back on the market. If you only have a bit of money to invest, real estate stocks may be a better alternative.

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If you’ve the time and expertise to analyze companies, you may feel comfortable picking individual real estate or REIT stocks for your portfolio. However, a real estate ETF could make your work easier. Such funds give you a bundle of real estate stocks or securities in a single place, allowing you to build a diversified portfolio with little money.

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What's the best housing market ETF to consider now?

The best real estate fund to invest in now is the one that holds properties that generate an income. These funds can come in a variety of forms. There are those that specialize in residential apartments, and others that serve the commercial building segment. You can also find funds that have exposure to a broad range of properties. If you’re in the market for the best housing funds to invest in now, check out the following:

  • The Charles Schwab U.S. REIT ETF (SCHH).
    • The Vanguard Real Estate ETF (VNQ).
    • The Vanguard Global Ex-U.S. Real Estate ETF (VNQI).

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    The Charles Schwab U.S. REIT ETF (SCHH) offers low fees

    The dividend-paying SCHH fund from Schwab specializes in U.S. REITs. It has cheap annual fees, charging a minimal expense ratio of 0.07 percent. Its portfolio spans diverse segments, with its top holdings being American Tower, Prologis, and Crown Castle International.

    The Vanguard Real Estate ETF (VNQ) charges competitive fees

    The VNQ fund invests in REITs across various segments, from office buildings to hotels and hospitals. It's been around since 2004 and investors have put more than $70 billion into it. The VNQ ETF charges an expense ratio of 0.12 percent, which is well below 1.06 percent average of similar funds. Like SCHH, its top holdings are American Tower, Prologis, and Crown Castle International. The fund pays dividends.

    The Vanguard Global Ex-U.S. Real Estate ETF (VNQI) gives you exposure to international properties

    The VNQI fund invests in international real estate, giving you geographically diversified exposure. With an expense ratio of 0.12 percent, it's a lower-cost REIT ETF. Asia-Pacific assets account for half of the fund’s portfolio, and European assets are also prominent.

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