Higher Yields, Lower Rates Suggest A Look At Real Estate

Mortgage rates continue to remain around all-time lows and they will remain at these levels as long as the 10 year and 30 year U.S. Treasury prices stay high. That means the yields of the longer term U.S. Treasuries will remain low until the U.S. treasury prices begin to drop. As long as countries around the world continue to lower interest rates, U.S. treasuries seem to be a safe haven.

How will I know if mortgage rates are going up or down?

Bond Yield Mortgage Rates

You may or may not know that U.S. mortgage rates are tied to the 10 year U.S. Treasury yields. They are not based on the much publicized prime interest rate that the Fed controls. The prime rate is a short term interest rate that the U.S. banking system uses.

The real estate industry has capitalized on the low interest rates and the economy improving since 2009. New home sales in July had the highest number since February of 2008. One ETF that has performed well in the real estate industry is SPDR S&P Homebuilders ETF (XHB). It is up over 25% since the February lows. See chart below.

XHB Chart

If you have the resources and time, you can now take this to the next level. Research to find the largest holding in XHB. Then find the best performing stocks and trade those instead of the ETF. I use Yahoo and Morningstar for my research. They both have free services.

Below is a list of the top 10 holdings for XHB.

Top 10 Holdings Chart

Go through this list of symbols to find the better performing symbols. Then trade just the top two or three performing symbols to potentially get a better return than trading the ETF. You can take this same process and apply it to any sector or ETF.

I hope this helps.

Simpler is Better,

Tucker Stipe

Tucker Stipe Content Provider

Throughout his career, Tucker Stipe has demonstrated the ability to adapt and change, from engineer, to sales management, to business owner. From 2009 to 2015, Tucker was Head Coach and Trainer for ETF Trend Trading. His passion is trading and helping others learn to trade.

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