ETFs
Are mortgage rates about to drop? Real Estate ETFs to Consider – June 18, 2024
Even though 30-year mortgage rates have improved and are once again on a downward trajectory, it is crucial to recognize that they remain relatively high. The 30-year mortgage rate is doing better than last November, currently sitting at 6.95% for the week ending June 13, down from 7.76% in early November.
With growing expectations of lower interest rates towards the end of the year, 2024 looks set to bring relief to the real estate market. Recent inflation data has ignited market expectations for an interest rate cut this year, with a 55% chance the Fed will cut the rate to 5-5.25% in September, according to the tool CME FedWatch.
Optimistic Mortgage Rate Projections
As the market increasingly expects interest rates to fall this year, with some economists anticipating one to two rate cuts this year, industry experts are becoming optimistic that mortgage rates will move favorably while throughout the year. A decline in the federal funds rate, which generally has an indirect impact on the mortgage rate, may prove beneficial to borrowers.
According to Fannie Mae, as quoted on Yahoo Financethe 30-year mortgage rate is expected to end 2024 at 7% and will continue to decline throughout 2025, ending the year at 6.60%.
According to Yahoo Finance, the Mortgage Bankers Association gave a more optimistic estimate for mortgage rates, predicting that the rate would end the current year at 6.5%, and would fall further in 2025 to 5.9%.
According to the National Association of Realtors (NAR), as quoted on Forbesthe 30-year mortgage rate is expected to average around 6.7% through the third quarter of 2024, ending the year at 6.5%.
Bank of America, according to Forbes, predicts the first interest rate cut in December 2024. Encouraged by positive inflation figures, it predicts that the 30-year mortgage rate will fall below 7% in the coming months .
Focus on ETFs
Moderating inflation levels could prove beneficial for the real estate market. Lower inflation will keep mortgage rates low, making homeownership less expensive for first-time buyers.
With favorable projections for the 30-year mortgage rate and improving U.S. economic conditions painting a better picture of the housing market, we’ve highlighted a few funds below for investors to capitalize on the optimistic outlook of the market.
iShares US Home Construction ETF (Quick quote ITBITB – Free report)
The iShares US Home Construction ETF seeks to track the performance of the Dow Jones US Select Home Builders Index with a basket of 44 stocks. The fund has amassed an asset base of $2.86 billion and charges an annual fee of 0.40%.
The iShares US Home Construction ETF has gained 2.26% over the past month and 46.02% over the past year.
SPDR S&P Home Builders ETF (Quick quote XHBXHB – Free report)
The SPDR S&P Homebuilders ETF seeks to track the performance of the S&P Homebuilders Select Industry Index, with a basket of 34 stocks. The fund has amassed an asset base of $1.78 billion and charges an annual fee of 0.35%.
The SPDR S&P Homebuilders ETF has gained 2.56% over the past month and 54.075% over the past year.
Invesco Building & Construction ETF (Quick quote PKBPKB – Free report)
The Invesco Building & Construction ETF seeks to track the performance of the Dynamic Building & Construction Intellidex Index with a basket of 32 securities. The fund has accumulated an asset base of $295.6 million and charges an annual fee of 0.62%.
The Invesco Building & Construction ETF has gained 2.45% over the past month and 54.87% over the past year.
Hoya Capital Housing ETF (Quick quote HOMZHOMZ – Free report)
The Hoya Capital Housing ETF seeks to track the performance of the Hoya Capital Housing 100 Index with a basket of 100 securities. The fund has amassed an asset base of $42.1 million and charges an annual fee of 0.30%.
The Hoya Capital Housing ETF has gained 3.01% over the past month and 28.22% over the past year.