In a six-month span, the Direxion Daily Real Estate Bull 3X Shares (DRN) is up over 30% and could see more upside ahead as interest rates start to decline. The residential real estate market could soon pick up as interest rates are starting to head downward.
“The mortgage-rate roller coaster ride appears to be over,” noted Forbes. “Recently, rates are behaving more like a water slide, moving downward with occasional plateaus and landing at their lowest levels in 15 months.”
In the meantime, prices don’t appear to be following suit with rates. But lower financing could certainly offer some breathing room for prospective homebuyers.
“The upward pressure on home prices is making this the most unaffordable housing market in history,” said Lisa Sturtevant, chief economist at Bright MLS. She noted home prices could see declines later this year. That’s due to an increased number of homes for sale. But substantial declines in the coming year may not come.
“Despite more leverage, buyers are still going to face a competitive market well into 2025 in most markets across the U.S. supply—while increasing—is still low by historical standards,” Sturtevant told Forbes. “And there are few signs indicating a major drop in home prices.”
In the meantime, there are opportunities in real estate that aren’t solely tied to the residential market.
3X the Broad Real Estate Market
DRN seeks daily investment results equal to 300%, or 300% of the inverse of the performance of the Real Estate Select Sector Index (IXRETR). This index includes securities of companies from real estate management, real estate development, and REITs, excluding mortgage REITs. As such, it gives traders broader exposure to the real estate market that’s not isolated to just residential real estate.
The fund’s top holdings eschew the residential real estate market, which may still be in flux despite rates coming down. As such, the fund primarily invests in companies outside that sphere such as Prologis and Equinix.
Equinix, in particular, operates in a corner of the real estate market that’s gaining momentum: data centers. With advancements in technology like artificial intelligence, high-speed data centers will be a must.
“It’s interesting when we look at our global business today, not just within real estate, but across the entire firm, we see data centers as the most exciting asset class,” said Nadeem Meghji. He is the global co-head of Blackstone Real Estate.
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