The interest rate cut cycle is approaching in 2025! Warren Buffett is also placing bets—could the housing sector bring investment opportunities?

Equip yourself and prepare for the upcoming rate-cutting cycle.

The moment that investors have been anticipating all year has finally arrived.

The Federal Reserve is expected to announce its first rate cut decision for 2025 at 2:00 AM Beijing time on Thursday, with the market generally predicting a 25-basis-point reduction as the most likely outcome...

As the rate-cutting cycle approaches, many astute investors are seeking new opportunities. In addition to the sectors mentioned in previous articles about rate cuts,technology stocks、gold stocks、Cryptocurrency、Biotechnology、Financial creditIn addition to investment opportunities across various industries such as biotechnology and financial credit, this article will present another sector poised to benefit — real estate.

Interest rates remain the core variable and critical factor in the real estate market. Historical experience shows that once the Federal Reserve initiates a rate-cutting cycle, the real estate market often responds positively. Lower interest rates directly reduce borrowers' loan costs, significantly enhancing their purchasing power and willingness to enter the market.

Buffett has already made an early bet! Could the housing sector bring investment opportunities?

Looking at the gains over the past 60 days, although property stocks have underperformed compared to technology stocks, they have still entered an upward trend, $D.R. Horton(DHI.US)$ 、 $PulteGroup(PHM.US)$ 、 $Toll Brothers(TOL.US)$ with cumulative gains exceeding 30%. $Lennar Corp(LEN.US)$ An increase of over 26%, $NVR Inc(NVR.US)$ up nearly 15%.

Notably, in the second quarter of this year, Warren Buffett, the Sage of Omaha, established a new position in one of the largest residential builders in the United States, $D.R. Horton(DHI.US)$ . Meanwhile, filings show that Berkshire Hathaway also increased its stake in another residential builder, $Lennar Corp(LEN.US)$ .

In the current market environment, Buffett's series of moves are highly significant. As one of the most closely watched investors globally, his actions are often seen as a 'bellwether' for market trends. The decision to add positions in residential construction stocks at this time undeniably adds substantial weight to the bullish outlook for the sector, reinforcing expectations that fundamentals in the housing industry may be improving.

Moreover, beyond real estate stocks, investors can also extend their attention to upstream segments of the housing supply chain. As a supplier of building products and equipment, $Masco(MAS.US)$ is considered a noteworthy 'potential stock.' Despite its lackluster stock performance so far this year, it has surged nearly 20% over the past 60 days.

Besides these real estate stocks, there are numerous real estate-related ETFs on the U.S. stock market worth noting for investors. The five largest ETFs currently include $Ishares Trust Global Reit Etf(REET.US)$ 、 $Vanguard Real Estate ETF(VNQ.US)$ 、 $iShares US Real Estate ETF(IYR.US)$ 、 $Schwab US REIT ETF(SCHH.US)$ 、 $Real Estate Select Sector Spdr Fund (The)(XLRE.US)$ , with an increase within the range of 1% to 4% year-to-date.

Why are real estate stocks poised to outperform in a rate-cutting cycle?

The real estate market is a typical interest-rate-sensitive sector, with its historical performance directly correlated to interest rates. The current market reaction indicates that investors have begun pricing in the possibility of future rate declines. The average rate on a 30-year fixed mortgage in the U.S. fell by 12 basis points to 6.13% on Monday, marking the lowest level since the end of 2022.

Overall, the strong performance of U.S. real estate stocks is driven by heightened market expectations for the Federal Reserve’s rate cuts. As mortgage rates decline, homebuyer activity is expected to rise significantly, further propelling growth in the sector.

However, while a rate-cutting cycle provides tailwinds for real estate stocks, their upward momentum must fundamentally rest on the condition of achieving a 'soft landing or moderate economic growth.' Investors should not focus solely on the single positive factor of declining rates but must carefully assess the current phase of the economic cycle, taking into account factors such as economic growth, employment data, and corporate earnings prospects, to make more comprehensive investment decisions.