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Real Estate ETF ‘VNQ’ is Gaining Despite Negative Monthly Flows

This article was originally published on ETFTrends.com.

Investors exited from the Vanguard Real Estate ETF (VNQ) to the tune of $2.4 billion in the past month according to data from XTF.com, but that didn't stop VNQ from gaining 6.3 percent month-to-date.

VNQ pierced its 50-day moving average and is heading towards its 200-day moving average. Despite the mostly negative news coming from the real estate sector, VNQ has been tracking higher than the S&P 500 as of late.

This Real Estate ETF is Gaining Despite Negative Monthly Flows 1

Just last month, the National Association of Home Builders/Wells Fargo Housing Market Index hit a three-year low. A combination of rising interest rates and low home affordability dented the housing market for much of 2018.

However, builder confidence rebounded as the index went up to 58 in January compared to the 56 reading in December. Furthermore, the central bank has been sounding increasingly dovish as of late, which could mean that less rate hikes than anticipated for 2019–something that could help give the sector a much-needed boost.

Prices Falling, Rents Rising

Rising in conjunction with mortgage rates are home prices, putting prospective buyers out of reach. The latest data from the National Association of Realtors showed that the Quarterly Housing Affordability Index has been dropping thanks to a rise in median home prices.

However, it appears that prices are beginning to soften. Home prices in the month of November logged a 5.1 percent annual gain, which represents its smallest increase since August 2015.

In the meantime, rental prices for single-family homes increased 2.9 percent annually in November 2018, which is up from the 2.8 percent annual growth compared to a year ago.

"Long-term rent increases have been lower than long-term home price increases," said Molly Boesel, principal economist at CoreLogic. "For example, rent prices increased 17 percent over the past five years, compared with a 32 percent increase in home prices over the same period. Additionally, lower-priced rentals and homes increase 1 ½ to 2 times faster than higher-priced rentals and homes."

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