Real estate prices keep rocketing higher, prompting market experts to wonder whether the market is getting frothy and posing an interesting opportunity with strategies like the Invesco S&P 500® Equal Wt Real Estate ETF (EWRE).
Per the fund’s description, EWRE seeks to track the investment results of the S&P 500® Equal Weight Real Estate Index. The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.
“An equal-weighted index is a stock market index – comprised of a group of publicly traded companies – that invests an equal amount of money in the stock of each company that makes up the index. Thus, the performance of each company’s stock carries equal importance in determining the total value of the index,” a Corporate Finance Institute article said.
“Equal-weighted indexes are more diversified than market capitalization-weighted indexes, and, therefore, may carry less risk,” the article continued. “Equal-weighted funds focus on value investing, which is considered by many market analysts and investors to be a superior investing strategy.”
The underlying index is composed of all of the components of the S&P 500® Real Estate Index, an index that contains the common stocks of all companies included in the S&P 500® Index that are classified as members of the real estate sector, as defined according to the Global Industry Classification Standard (“GICS”). With an equal weight index, investors get a nice balance of real estate names without the concentration risk associated with one particular stock dominating the holdings.
What’s Next for Real Estate?
With real estate prices soaring so high for so long, prices have somewhat come back to earth. However, historically low mortgage rates could keep providing more tailwinds for the real estate market as more buyers are able to afford new or existing homes.
“With global market uncertainty surrounding the Delta variant of COVID-19, we saw 10-year Treasury yields drift lower and consequently mortgage rates followed suit,” said Sam Khater, Freddie Mac’s chief economist, in a Housing Wire article. “The 30-year fixed-rate mortgage dipped back to where it stood at the beginning of 2021, and the 15-year fixed remained at its historic low. This bodes well for those still looking to refinance, renovate or even purchase a new home.”
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