T
he real estate market is showing promise with rising home sales, moderating mortgage rates, increasing inventory, and stable price growth. Economic stability, urban renewal, and growing homeownership wealth are expected to enhance its attractiveness for investment in the coming years.

    Investors seeking diversification can consider strong REIT ETFs like iShares U.S. Real Estate ETF (IYR), Schwab U.S. REIT ETF (SCHH), and Vanguard Real Estate Index Fund ETF Shares (VNQ). These funds offer uncorrelated investments that reduce overall risk, allowing further diversification across various markets and investment types.

    Existing home sales are projected to increase by 9% in 2025 and 13% in 2026, while new home sales may rise by 11% in 2025 and 8% in 2026. Although mortgage rates remain high, they are expected to stabilize at the lower end of recent ranges.

    Real estate offers stable cash flow, tax benefits, equity building, competitive returns, inflation protection, and leverage opportunities, making it a reliable investment option for wealth creation and portfolio enhancement. Given these trends, let's evaluate the fundamentals of three real estate ETFs.

    ETF #3: iShares U.S. Real Estate ETF (IYR)

    IYR invests in public equity markets across the United States, focusing on stocks of companies operating in the real estate sector. With $5 billion in assets under management, its top holding is Prologis, Inc. (PLD) with a 7.69% weighting.

    ETF #2: Schwab U.S. REIT ETF (SCHH)

    SCHH invests in public equity markets across the United States, focusing on stocks of companies operating in various real estate and REIT sectors. With $8.12 billion in assets under management, its top holding is PLD with a 7.55% weighting.

    ETF #1: Vanguard Real Estate Index Fund ETF Shares (VNQ)

    VNQ invests in public equity markets across the United States, focusing on stocks of companies operating in the real estate and REIT sectors. With $37.59 billion in assets under management, its top holding is PLD with a 6.91% weighting.

    All three ETFs have strong outlooks reflected in their POWR Ratings, with IYR ranked #4, SCHH ranked #2, and VNQ ranked first in the Real Estate ETFs group.