Top Ways to Trade the Fear of 8% Mortgage Rates

At the moment, the 30-year mortgage rates sit just above 7.09%.

That’s the highest it’s been since April 2022. And unfortunately, with rates above 7%, a good deal of people aren’t buying or selling homes.

Fears of 8% — which could become reality – won’t help at all. “If the 30-year-fixed mortgage rate can hold at a high mark of 7.2% — and the 10-year yield holds at 4.2% — then this would be the high for mortgage rates before retreating,” said Lawrence Yun, chief economist at the National Association of Realtors, as quoted by MarketWatch. “If it breaks this line and easily goes above 7.2%, then the mortgage rate reaches 8%. At 8%, the housing market will re-freeze, with fewer buyers and far fewer sellers.”

Even rates above 6% have kept homebuyers on the sidelines.

Should we see 8% or more on a 30-year, housing stocks could retreat. To potentially profit, investors can always short – our buy put options on housing stocks, like Lennar, KB Home, and Pulte. Or, they can pick up inverse real estate ETFs that benefit from downside, including:

Direxion Daily Real Estate Bear 3X Shares (DRV)

With an expense ratio of 1.08%, the DRV ETF seeks daily investment results, before fees and expenses of 300% of the inverse of the performance of the Real Estate Select Sector Index.

ProShares UltraShort Real Estate (SRS)

With an expense ratio of 0.95%, the ETF seeks daily investment results, before fees and expenses, that correspond to two times the inverse of the daily performance of the S&P Real Estate Select Sector Index.

ProShares Short Real Estate (REK)

With an expense ratio of 0.95%, the REK ETF seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the S&P Real Estate Select Sector Index.

It’s just something to consider if we are near 8% on a 30-year.