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Real Estate Traders Look Ahead to Potential Challenges in 2020

This article was originally published on ETFTrends.com.

Real estate trade organization site Realtor.com assembled a list of housing trends for 2020 that could impact not only the market for buyers and sellers, but also the way ETF traders are looking to play the real estate market.

“In 2020, there will be opportunity for buyers, but in many ways the challenges they’ve faced for years are going to persist—challenges like difficulty finding the home that’s right for them, and competing with other buyers, especially in affordable price points," said Danielle Hale, chief economist at realtor.com

The economy will no doubt help steer what the real estate market will do and it makes sense for traders to be privy to the forthcoming challenges.

“As economic momentum moderated through 2019 and global headwinds gather, GDP growth is projected to post a modest 1.7 percent advance in 2020,” George Ratiu wrote in Realtor.com. “As the housing share of expenses continues rising, consumers—the largest contributor to output—will likely trim back on non-housing spending. A slowdown in consumer spending, coupled with rising global uncertainty and market volatility, can be expected to lead companies to contain costs and trim employment goals. An employment slowdown will move the unemployment rate from 3.6 percent at the start of 2020 to 3.9 percent by the end of the year—a jobless rate still below what would be expected in a healthy economy, but a shift in the wrong direction. In turn, consumer confidence will soften during the year, with the Conference Board’s Consumer Confidence Index estimated to decline 21 percent.”

“Following the Federal Reserve’s monetary accommodation, inflation expectations remain modest and well-anchored, translating into a 2.0 percent year-over-year increase in 2020,” he added. “While short term rates remain low, economic moderation is likely to impact bond markets, leading to mortgage rates moving mostly sideways in 2020. Rates for 30-year fixed mortgages are projected to average 3.85 percent during the next year.”

Bullish real estate sector traders can look at the Direxion Daily MSCI Real Est Bear 3X ETF (DRV) . DRV seeks daily investment results equal to 300% of the inverse of the daily performance of the MSCI US REIT Index, which is a free float-adjusted market capitalization weighted index that is comprised of equity REITs that are included in the MSCI US Investable Market 2500 Index. DRV invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse or short leveraged exposure to the index.

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