The housing market is replete with lenders offering low interest rates, but not enough in the supply arena to keep would-be home buyers appeased. Can the current housing market keep real estate exchange-traded funds (ETFs) afloat via low interest rates?

When the Federal Reserve decided to drop interest rates, it gave buyers the green light to hit the open road to home ownership only to find out that a detour of low supply stopped them dead in their tracks.

“If, or better yet, when inventory in this segment begins to take a downturn, the vast majority of homebuyers are going to feel its effects as their options rapidly dwindle,” said George Ratiu, senior economist at realtor.com. “September inventory trends, especially in the mid-market, may be the canary in the coal mine that we could be headed for even lower levels of inventory in early 2020.”

Build more homes might seem like the simple solution, but builders have yet to keep pace with demand.

“It’s not just the overall supply of new construction that’s gone down, but the supply of starter homes, so it’s the affordability challenge at the entry level that’s been a particular challenge,” said Robert Dietz, chief economist of the National Association of Home Builders. “Right now only about 10% of newly-built home sales are priced under $200,000. Five years ago that share was 1 in 5, and 10 years ago it was 40% of new home sales were priced under $200,000.”

“We’ve faced what has been called a perfect storm of supply side challenges,” noted Dietz. “There has been an ongoing labor shortage, we lack the necessary land and lots to build homes, we’ve had building material cost concerns, and then probably the most important factor has been higher regulatory costs since the great recession.”

traders will 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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