A summer real estate market should help heat up the sector amid relatively high interest rates. If the real estate market is indeed in recovery mode, that’s just what it needs for bullish momentum.
According to Realtor.com, home sales could be hinting at a recovery. This comes amid a high inflation environment that’s pushing rates higher, and thus putting home ownership out of the reach of prospective buyers who may think twice about real estate financing.
On the seller’s side, a lack of interest from buyers could keep them from putting “For Sale” signs on their properties. All that said, data could be showing otherwise and that a recovery in the summer months could be manifesting itself already.
“U.S. pending-home sales fell in May, the National Association of Realtors said on Thursday but the housing market is still showing signs of being in recovery mode,” the Realtor.com article said. “Demand for homes is still strong, despite mortgage rates hovering near 7%, but buyers are finding few properties for-sale to choose from as homeowners hold out on selling.”
Despite the numbers, the sector may not be in dire straits. Furthermore, a Fed pause could give way to decelerated rate hikes and further prop up the real estate market.
“Despite the headline figure revealing that home sales are down, the housing market isn’t in a crisis—it’s actually in recovery mode,” the article added further, noting that “pent-up demand for homes from buyers who have accepted the new normal of high interest rates, combined with homeowners’ reluctance to sell their home and give up their rare pandemic-era ultra-low mortgage rate has led to an imbalance in demand and supply.”
2 Options to Trade the Real Estate Sector
If bullishness indeed prevails, then traders can consider the Direxion Daily Real Estate Bear 3X Shares (DRV). The fund seeks daily investment results equaling to 300% of the performance of the Real Estate Select Sector Index.
The Real Estate Select Sector Index (IXRETR) is provided by S&P Dow Jones Indices. This includes securities of companies from the following industries: real estate management, real estate development, and real estate investment trusts (REITs), excluding mortgage REITs.
On the flip side, if more bearishness shows up in the numbers, traders can take the other side with equal leverage. This is available in the Direxion Daily Real Estate Bull 3X Shares (DRN).
For more news, information, and analysis, visit the Leveraged & Inverse Channel.
