Low rates are spurring a rise in the demand for mortgages, which in turn, is fueling an appetite for real estate. Even with Covid-19 in tow, the demand for mortgages is up 33% from a year ago.
“Homebuyers appear to have an insatiable appetite for new and existing homes, applying for mortgages at an incredible pace,” a CNBC report noted. “Mortgage applications to purchase a home rose just 0.4% last week from the previous week but were a remarkable 33% higher than a year ago, according to the Mortgage Bankers Association.”
With more individuals using their homes as their offices amid social distancing measures, the demand for more space is what’s been the hot topic for real estate seekers.
“The home purchase market remains a bright spot for the overall economy,” said Joel Kan, an MBA economist. “Mortgage rates at record lows and households looking for more space are driving this summer’s surge in demand.”
30 Year Mortgage Rate data by YCharts
Mortgage-Related ETFs to Consider
With the demand for mortgages up, ETF investors can take a look at the VanEck Vectors Mortgage REIT Income ETF (MORT). MORT seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Mortgage REITs Index (the “Mortgage REITs Index”).
MORT normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index. The Mortgage REITs Index may include small-, medium- and large-capitalization companies.
Another fund to look at is the FlexShares Disciplined Duration MBS Index Fund (MBSD). MBSD seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the ICE BofA Merrill Lynch, Constrained Duration US Mortgage Backed Securities IndexSM.
The underlying index reflects the performance of a selection of investment-grade U.S. agency residential mortgage-backed pass-through securities. The fund generally will invest under normal circumstances at least 80% of its total assets (exclusive of collateral held from securities lending) in the securities of the underlying index and in “TBA Transactions” that represent securities in the underlying index.
In order to obtain more broad-based real estate exposure, Investors can opt for funds like the Vanguard Real Estate ETF (NYSEArca: VNQ). The fund seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of the MSCI US Investable Market Real Estate 25/50 Index that measures the performance of publicly traded equity REITs and other real estate-related investments.
For more market trends, visit ETF Trends.
