Several Inverse and Leveraged ETFs have been notable players this year, and with the U.S. housing market already starting to cool off thanks to rising rates, investors may want to look at a real estate bear ETF like the Direxion Daily Real Estate Bear 3X Shares ETF (DRV).
To be clear, inverse and leveraged ETFs are powerful tools and not to be taken lightly, traded daily with rapidly shifting exposures – but the potential is there to benefit from a U.S. housing market buckling not only from rising rates but also to some extent under its own weight.
New for-sale listings on the market were weak in September, dropping for a third straight month at 11.4% from August. Furthermore, while construction has slowed, with single-family housing starts down to the lowest in more than two years. Perhaps more concerningly is how far the housing market has fallen off since 2019, still 38% below where total inventory was in 2019.
While prices have a long way to go from their already high levels over the last few years before hitting a “crash” scenario, there’s a strong bear argument to be made, and that’s where investors can look at DRV, which has already provided its investors some strong performances in a wild year so far.
DRV offers -3x daily leverage to a U.S. Reit index, the S&P Real Estate Select Sector (300%), and are not appropriate for investors who don’t have the time to monitor the position daily, at the same time, those investors should know that the -3x approach is a daily goal, with multiple trading sessions tied more to the index’s performance.
Investors considering DRVs may think of the ETF as a kind of hot hand to be rotated on and off the floor for blistering scoring runs but watched closely to avoid cold streaks. DRV has returned 100.1% YTD compared to 68.3% for the Factset Segment Average, with 43.5% over the last three months compared to 29.2% for the Factset Segment Average.
DRV has taken in $40 million in net inflows over the last month as well, according to VettaFi, and charges a 99 basis point fee.
For those looking for balance with DRV, also make sure to check out the Direxion Daily Real Estate Bull 3x ETF (DRN) to benefit if the real estate goes the other way.
For more news, information, and strategy, visit the Leveraged & Inverse Channel.
