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Mortgage Real Estate Capped ETF: A Revival On The Way


  • REM is a fund that closely tracks the FTSE NAREIT All Mortgage Capped Index.
  • After an initial recovery, there has been a resistance due to volatility in the mortgage industry.
  • The fund comprises undervalued shares offering a very high yield.
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Don’t wait to buy real estate, buy real estate and wait. – T. Harv Eker

The mortgage industry has been one of the hardest-hit sectors since the coronavirus outbreak reached American shores. This is despite the 30-year mortgage rates dropping, with May recording the lowest rate historically, since 1971. Homebuyers have taken advantage of the drop in rates, as the sale in newly built homes increased by nearly 1% in April compared to March. This may be a promising sign for the industry that has yet to recover from its lows, as reflected in the price of shares of some of the popular ETFs. The iShares Mortgage Real Estate Capped ETF (BATS:REM) is one such fund that tracks the FTSE NAREIT All Mortgage Capped Index and is composed of US REITs.

Source: Seeking Alpha

Trading at almost half the value of its 52-week high, the fund has a trailing twelve-month dividend yield of 16.05%. This attractive yield has still not lured investors into this fund, as it continues to remain flat after a short stint upwards. Though it is fraught with multiple risks, the opportunity that the fund provides should be analyzed in depth before considering it as an investment option for your portfolio.

Expect a further drop in mortgage rates

The fall in the mortgage rates is expected to continue in the near future. In terms of the monthly payments, it is estimated that the amount would be equivalent to what was paid back in 2015 or 2016. This would surely give homebuyers the incentive to carry out additional purchases in normal circumstances. Hopefully, as the economy reopens, there is a return to some normalcy.

Another indicator of the activity picking up is that the price of houses has not witnessed any sharp drop recently. The Fed's involvement in the

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This article was written by

Michael A. Gayed, CFA profile picture
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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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