While mortgage rates are double what they were a year ago, home prices have been falling since June, slightly boosting consumer confidence in the housing market. Fannie Mae’s Home Purchase Sentiment Index increased 3.7 points in December, slightly above its all-time low set in October.
Three of the index’s six components improved month-over-month, including those associated with homebuying conditions, mortgage rate outlook, and job security. While only 21% of respondents said they believe that now is a good time to buy a home, it’s still up from 16% in October, signaling that consumer sentiment is improving.
“In December, consumers reported increased expectations that mortgage rates and home prices may decrease over the next year – perhaps reflecting recently observed declines in mortgage rates and average home prices,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.
Investors looking to tap into real assets while prices are beginning to drop and consumer confidence is starting to rise may want to consider the Donoghue Forlines Yield Enhanced Real Asset ETF (DFRA), which seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FCF Yield Enhanced Real Asset Index, an investment strategy developed by FCF Advisors subsidiary FCF Indexes.
The fund invests primarily in U.S.-listed real asset companies of all sizes. This includes companies related to real estate, infrastructure, commodities, and natural resources.
Eligible securities are scored depending on their ability to generate profit and pay dividends using a fundamental evaluation that includes quality of earnings, free cash flow profitability, and dividend yield. Those that represent the top 25% of the scored equity universe are considered for inclusion.
Target weight is allocated to each security based on the combination of the three factors and market cap. Based on the target weight, the index selects up to 75 stocks or until 90% of the cumulative security weight has been included, whichever occurs first.
DFRA also provides a hedge against inflation, as it looks to provide better risk-adjusted returns than broad market equities in periods of positive inflation surprises. It also seeks to generate a higher dividend yield than broad market equities and the market cap-weighted real asset equities universe, with the potential of continuous dividend payments over the long term.
The fund applies FCF Advisors’ Free Cash Flow Quality Factor Model to seek alpha generation over a market cap-weighted real asset equity universe.
For more news, information, and strategy, visit the Free Cash Flow Channel.
JAMES COMTOIS JANUARY 11, 2023