A Housing Boom in These Four Cities Could Boost Real Estate ETFs

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:

  1. Spokane, Washington: The median price of an existing home is $255,000, or $350,000 for a new home.
  2. 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.
  3. Charlotte, North Carolina: The median price of an existing home is $248,000, and the median price of a new home is $325,000.
  4. 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).

For more market trends, visit the ETF Trends.