How to Short Real Estate & the Housing Market
Inverse ETFs for shorting REITs, the housing market, and mortgage backed securities
Real Estate Inverse ETFs
You can short the real estate market through inverse REIT ETFs:
| ETF | Name | Leverage | Shorts |
|---|---|---|---|
| DRV | Direxion Daily Real Estate Bear 3X | 3x | MSCI US REIT Index |
| SRS | ProShares UltraShort Real Estate | 2x | Dow Jones US Real Estate |
| REK | ProShares Short Real Estate | 1x | Dow Jones US Real Estate |
How to Short Mortgage Backed Securities
Made famous by "The Big Short," shorting mortgage backed securities (MBS) is much harder for retail investors than it was in 2007. Today's options include:
- REIT inverse ETFs: DRV and SRS provide indirect exposure to real estate declines, including mortgage-related REITs
- Bond inverse ETFs: Products like TBT and TMV short long-term Treasuries, which can benefit from rising rates that pressure the housing market
- Put options on REITs: Buy puts on specific REIT stocks or ETFs like VNQ
There is no direct retail ETF that shorts mortgage backed securities specifically. The closest proxy is shorting REIT indices through inverse ETFs.
How to Short the Real Estate Market
The real estate market can be shorted through several approaches:
- REIT inverse ETFs — The simplest approach. Buy DRV, SRS, or REK on any brokerage
- Homebuilder puts — Buy put options on homebuilder stocks (e.g., D.R. Horton, Lennar)
- Short homebuilder ETFs — Short XHB (SPDR Homebuilders ETF) with a margin account
- Rising rate plays — Bond inverse ETFs benefit from rising rates, which pressure housing
When Might Real Estate Shorts Make Sense?
- Rising interest rates making mortgages more expensive
- Overvalued housing markets with declining affordability
- Increasing vacancy rates in commercial real estate
- Weakening economic conditions affecting property demand
Remember: real estate markets move slowly compared to stocks. Short-term inverse ETFs may not be ideal for long-term real estate bearish views due to leverage decay.