3 Property Stocks to Watch in 2022

Is overpaying $10,000 or more for a new property worth it? This is the question many Americans had to ask themselves in 2021 as a result of the real estate crisis. High demand and limited supply, combined with low mortgage rates resulted in soaring real estate prices ($DSRE). The sharp increase in housing prices earned the real estate sector 42% annual growth, making it the second-best performing S&P sector of 2021. 

So what exactly happened in real estate last year? Classified as a seller’s real estate market, sellers benefited from real estate transactions heavily due to dramatic increases in property prices compared to initial investments. Between October 2020 and October 2021, the average price of an American home grew by 18%, making it the largest yearly increase in nearly 45 years. The crisis also created a frenzy amongst American buyers who were desperate to secure a home. Homes sold at astronomically fast rates while buyers often had to overpay in an effort to make their offer the most desirable to the seller. 

Although buyers emptied the last of their pockets to get into their new homes, sellers celebrated all the way to the bank with their earnings. The desire to buy a home last year can also be traced back to the shortage of available building materials and the surge in their prices. 

In May of 2021, builders reported missing over 20 of the most essential materials needed to build a home. Disruptions in construction material supply chains interrupted the delivery and production of essential materials such as plywood (-503B), copper wiring (HGH22), steel (HVH22), insulation, HVAC equipment, and lumber (LSH22). The average price of lumber tripled at one point last year- making building a new construction home much more costly. 

How was this reflected in the market for stocks with real estate exposure? Many companies experienced lows in March 2020 at the start of the COVID-19 pandemic but experienced steady growth throughout the rest of 2020 and look poised to possibly repeat in 2022. 

Here are some names to keep an eye on with the Federal Reserve signaling an increased willingness to raise interest rates in the near future. 

Simon Property Group (SPG) is an American real estate investment trust that invests in large shopping malls and community centers. With properties across North America, Asia, and Europe, Simon provides communities a gathering space for millions of visitors daily. The company generates billions in annual sales and operates as the only real estate company in the S&P 100 index, which is designed to measure the performance of multinational, blue-chip companies with significant importance in the global equity markets. Shares of Simon rose +1.32% to $163.16 on Thursday, despite an overall poor trading day amongst stocks. As Thursday inched closer to the closing bell, the NASDAQ was down about 0.1% and the S&P 500 down 0.2%. Highly developed and elegant malls, such as Simon’s, are expected to survive their counterparts but the future of Simon is unclear as nearly 25% of malls are expected to close within the next 5 years due to the COVID-19 pandemic and emergence of e-commerce. 

Realty Income Corporation (O) maintains a diverse real estate portfolio with nearly 11,000 commercial real estate properties. Realty Income supports about 650 customers across 60 industries with locations in all 50 states, Spain, Puerto Rico, and the United Kingdom. Known as The Monthly Dividend Company, Realty Income has provided investors with monthly dividends that have steadily increased over the past 52 years. The monthly dividend is supported by the company’s thousands of real estate properties that generate rental revenue from long-term lease agreements with commercial clients. It has a diversified client list, including 7-Eleven, FedEx (FDX), LA Fitness, Walmart (WMT), AMC Theaters (AMC), Kroger (KR), and Home Depot (HD). Third Quarter 2021 reports indicate that as of November 1, 2021, Realty Income Corporation approximates $25.2 billion in real estate investments, a dividend yield of 4.0%, dividend growth of 215%, and a compound average annual return of 15.1%. The company operates at an impressive compound average annual return, operating above the Dow Jones Industrial average of 10.9% and S&P 500’s 10.7% rate. 

American Tower Corporation (AMT) was founded in 1995 and has become one of the largest global Real Estate Investment Trusts (REITs). They are a leading independent owner, operator, and developer of wireless and broadcast communications real estate. In 2021, the company reported owning approximately 219,000 communication sites in the U.S., Asia, Europe, Middle East, Africa, and Latin America. Currently trading at $266.58 per share, American Tower’s price per share has dropped this week, making it an ideal time to buy into the company’s shares. American Tower’s third quarter 2021 reportings indicate total revenue increased 21.9% to $2,454 million, property revenue increased 19.2% to $2,369 million, and net income increased 56.9% to $726 million. The company accredits this growth to the deployment of 5G network services in Europe and the U.S. and the progress of 4G build outs throughout other parts of the world. Long-term investments in American Tower look promising as the price of a single share has more than doubled over the course of the last five years.