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AvalonBay Communities (
AVB) is my favorite housing REIT. I say that for a couple of reasons. First, AVB is the biggest REIT in the multifamily housing business, with 173 apartment communities in its portfolio that span approximately 51,000 rental units (and more are on the way). More important, I like AvalonBay because it generates fundamental performance more like a commercial REIT. Currently, this stock pays out a hefty 3.45% dividend yield.
The biggest tailwinds spurring on multifamily housing in recent years have been the exact same factors causing concern in other corners of the REIT world: uncertainty over real estate prices and stricter lending policies for homeowners. As more people opt to defer home purchases (or opt to avoid buying in the future altogether), landlords such as AvalonBay benefit. Again, location has been key to AVB's success. Because the firm focuses its portfolio in affluent metro areas from New York to San Francisco, the firm has enjoyed strong demand and occupancy rates.
Demographics are a big driver for AVB going forward, especially as young successful professionals become willing to pay more rent for upmarket locations near work and nightlife. It also doesn't hurt that barriers to entry are high; rivals can't just build up supply in the niche areas where AVB operates, since acceptable building sites are scarce.
If you're going to buy a residential REIT, this is the one to go with.
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