Will the Coronavirus Negatively Impact the U.S. Real Estate Market?

We all know that the stock market has been feeling the wrath of the coronavirus, but how is it affecting the real estate market? It might not be as dire compared to the financial crisis back in 2008, but it also depends on who you ask.

Per a Fox Business report, the National Association of Realtors reported via a survey that “more than 70,000 residential members showed that about 78 percent of respondents said the situation had not changed homebuyer interest in their markets. That compares with 13 percent who reported a decline in interest – numbers that were higher in California and Washington specifically.”

“Eighty-seven percent said seller behavior hadn’t changed, though 9 percent said the number of homes on the market had declined – a figure that was also higher in California and Washington, two states hit hard by the initial U.S. outbreak of the virus,” the report added.

On the other hand, Hovnanian Enterprises Inc. chairman and CEO Ara Hovnanian noted that “We have been selling a lot of homes.” On the flip side, the National Association of Homebuilders is more cautious.

“We are hopeful the solid underpinnings of the national economy can weather this national emergency; nonetheless, the federal government must take decisive action to support the housing sector, both for the homebuyers who power housing markets across the country and for the small businesses that build 80 percent of the new homes in America,” a National Association of Homebuilders letter read.


^MSEMURE data by YCharts

Can a Run in Real Estate Boost Cyclicals?

If investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors. RWDC tilts towards defensive sectors like health care and consumer staples as shown in the fund’s breakdown. Conversely, it shorts names like the top technology giants that skew towards momentum.

RWDC seeks investment results that track the MSCI USA Defensive Sectors – USA Cyclical Sectors 150/50 Return Spread Index. The Index measures the performance of a portfolio that has 150% long exposure to the MSCI USA Defensive Sectors Index (the “Long Component”) and 50% short exposure to the MSCI USA Cyclical Sectors Index (the “Short Component”).

Conversely, for investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well but from their outperformance compared to defensive sectors.

For more market trends, visit ETF Trends.