Low mortgage rates can help spur more real estate buying activity among prospective homeowners, especially in hot housing markets that are primed for a boom. This could also be a boon for real estate-focused ETFs.
“Things are lined up to be a great year,” said Greg McBride, Bankrate chief financial analyst. “The surprise plunge in rates to start the year has spurred a surge in refinancing activity that wasn’t expected and with unemployment at 50-year lows, there are plenty of would-be home buyers in the market. Both purchase and refinance originations will be strong this year – oftentimes it’s only one or the other.”
According to a Fox Business report, real estate broker firm Redfin cited “four of the real estate markets seeing the largest growth in home sales and searches from out-of-town buyers also have low building costs. All four are located in states with either low – or no – state income taxes, from Washington to North Carolina and Florida.”
Here are the four cities that Fox Business tagged as prime for a housing boom:
- Spokane, Washington: The median price of an existing home is $255,000, or $350,000 for a new home.
- Las Vegas, Nevada: The median home price of an existing home is $285,000, and the median price of a new home is $388,000.
- Charlotte, North Carolina: The median price of an existing home is $248,000, and the median price of a new home is $325,000.
- Orlando, Florida: The median sale price of an existing home is $250,000, and a new home costs about $316,000.
Real Estate ETF Exposure
Investors who want broad exposure to the real estate market via ETFs can start with the Vanguard Real Estate ETF (NYSEArca: VNQ). VNQ seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of the MSCI US Investable Market Real Estate 25/50 Index that measures the performance of publicly traded equity REITs and other real estate-related investments. VNQ is up 7.26 percent year-to-date, according to Yahoo Finance Performance numbers.
Traders will want to keep on an eye on when playing leveraged real estate exchanged-traded funds like the Direxion Daily MSCI Real Est Bull 3X ETF (NYSEArca: DRN) and Direxion Daily MSCI Real Est Bear 3X ETF (NYSEArca: DRV).
Overall, Direxion ETFs will help traders:
- Magnify your short-term perspective with daily 3X leverage
- Go where there’s opportunity, with bull and bear funds for both sides of the trade; and
- Stay agile – with liquidity to trade through rapidly changing markets
The MSCI US IMI Real Estate 25/50 Index (M2CXVGD) is designed to measure the performance of the large-, mid- and smallcapitalization segments of the U.S. equity universe that are classified in the real estate sector as per the Global Industry Classification Standard (GICS).
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