Persistent inflation could keep the Federal Reserve from cutting rates further, which could hamper the real estate industry. With uncertainty abounding, it’s helpful to have a pair of ETFs that address both the bearish and bullish scenarios.
One of the drivers of the real estate market is the ability to attain financing. And with rates still relatively high, that could continue to be an obstacle for prospective real estate buyers. However, Bankrate noted that 2025 could actually be more favorable to real estate than 2024, but there are caveats to consider.
Bankrate cited two major headwinds for the real estate market: rising prices and a slowdown in construction. Additionally, an incoming presidential administration could impact policy agendas they may affect the real estate market.
“Continued economic growth and worries about inflation and government debt will keep mortgage rates elevated,” said Greg McBride, CFA, chief financial analyst for Bankrate.
Still, interest rates will continue to be a primary driver of what the real estate market will do. Hotter-than-expected economic data could give the Fed pause when it comes to rate cuts, which could keep mortgage rates relatively high.
“The average 30-year fixed mortgage rate will spend most of the year in the 6s, with a short-lived spike above 7 percent, but never getting below 6 percent,” McBride added. “Continued economic growth and worries about inflation and government debt will keep mortgage rates elevated.”
Both Sides of the Real Estate Coin
Deciding whether to be bullish or bearish on real estate at this point is akin to a coin flip. That said, traders can play both sides of the coin with leveraged and inverse ETFs from Direxion.
If high rates apply downward pressure on real estate, consider using the Direxion Daily Real Estate Bear 3X Shares (DRV ). The fund seeks daily investment results equaling to 300% of the inverse performance of the Real Estate Select Sector Index, giving traders broad-based exposure as opposed to single stocks where concentration risk is magnified.
The Real Estate Select Sector Index (IXRETR) is provided by S&P Dow Jones Indices. This includes securities of companies from the following industries: real estate management, real estate development, and real estate investment trusts (REITs), excluding mortgage REITs.
On the flip side of the coin, if rate cuts resume and real estate equities strengthen, traders can take the other side with equal leverage. This is available in the Direxion Daily Real Estate Bull 3X Shares (DRN ).
For more news, information, and analysis, visit the Leveraged & Inverse Channel.
