How Joe Biden's Tax Credit Would Ripple Across the World of ETFs

Low interest rates could get a helping hand to boost the real estate market with a Joe Biden presidency in place. A first time homebuyer tax credit should help ramp up the real estate sales and thus, feed into gains for the Direxion Daily MSCI Real Estate Bull 3X Shares (DRN).

The bullish DRN seeks daily investment results of 300% of the daily performance of the MSCI US IMI Real Estate 25/50 Index. The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.

The index is designed to measure the performance of the large-, mid- and small-capitalization segments of the U.S. equity universe that are classified in the real estate sector as per the GICS. Of course, with its triple leverage, the ETF isn’t for the faint of heart in terms of risk.

DRN Chart

Real estate industry expresses support for Biden’s $15,000 tax credit

Traders can certainly use DRN if they’re feeling positive that the president-elect will follow through. Per a HousingWire article, “The news over the weekend that former Vice President Joe Biden is now president-elect elicited positive reactions from several real estate leaders who saw the upside for the housing market.”

“Biden’s housing proposals include a $15,000 first-time homebuyer tax credit and he will focus on fair housing and affordable housing issues,” the article added. “He is also likely to appoint a new head of the Federal Housing Finance Agency.”

The question now for market experts is: will this tax credit be enough? The real estate market must also address the supply side of the economic equation.

“But that’s not the full story, the full story is that stimulating the demand just by itself I think is insufficient,” Yun said. “Right now the housing market is facing a significant housing shortage. So if we add further stimulus to the demand without addressing the supply… it will simply bump up the prices even higher.”

“We simply have not been building a sufficient amount of homes,” Yun added. “We also need to address the supply side, how do we bring more supply? It’s going to take some time, but just adding more fuel to the housing demand without addressing the supply would just simply mean that home prices could accelerate much higher and partly negating some of the benefits of the $15,000 tax credit.”

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