Exchange traded funds (ETFs) invested in the real estate sector took a hard, fast ride down over the last few months thanks to the subprime problems and credit tightening. The housing market suffered so severely that it prompted the Federal Reserve to cut interest rates earlier this week. The action sent the market and many ETFs soaring upward. However, iShares Dow Jones U.S. Real Estate (IYR) has made little headway. Although it’s up 14.0% since the market low on Aug. 15, it’s still down 7.2% year-to-date.

Some analysts wonder if the reduced interest rates will have any role in reviving real estate ETFs, reports Mary Umberger for the Chicago Tribune. It can’t save homebuyers from the escalating adjustable mortgage rates that they face. Homeowners and lenders are frustrated on both sides because the rules of what constitutes subprime keep changing, which is reflected in vacillating mortgage rates. However, other experts argue that the rate cut will help homebuyers indirectly because it reduces interest rates on their credit cards, which provides a sense of relief. In addition, lower interest rates on credit cards generally leads to more consumer spending. In turn, consumer spending tends to help the overall economy, including housing.


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.