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So I'm looking at these popular mortgage ETFs, MORT and BKLN, and they have been going down over the past year, while inflation has been going up. Any idea as to why? Real estate is often regarded as a hedge against inflation, so assuming that's true I would expect mortgages to appreciate. What am I missing? Thanks!

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    You are under the mistaken impression that the stock market moves based on logic instead of emotion.
    – JohnFx
    Commented Jul 17, 2022 at 6:13

1 Answer 1

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A mortgage ETF is not correlated with real estate values. It is correlated with the value of loans used to buy real estate.

As inflation goes up, it is easier for the person to pay off the mortgage because their paycheck has presumably increased with inflation but the amount of the payment is fixed.

Also, the value of the mortgage to the holder of it goes down. You are still getting the mortgage payments but they are worth less.

Another possible factor is that when the economy gets worse the ability of people to pay their mortgage goes down. If defaults increase then the value of the mortgage also goes down.

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  • MORT is 99.63% stocks. BKLN looks like corporate bonds. This answer talks about MBS (mortgage-backed securities). While true on its own, I don't think this answer addresses the OP's question.
    – void_ptr
    Commented Jul 17, 2022 at 22:41
  • Thanks, that's very helpful. Do you know of any ETFs or other accessible investments that ARE correlated with real estate values?
    – nijshar28
    Commented Jul 18, 2022 at 0:50
  • Google REIT to learn more
    – minou
    Commented Jul 18, 2022 at 1:27
  • The answer is correct, MORT holds mortgage REITs, which in turn hold mortgages and MBS. vaneck.com/us/en/blogs/income-investing/… Commented Jul 18, 2022 at 2:55
  • As far as REITs go, I believe most ETFs (e.g., XLRE) are also slightly down or flat over the past year, so it's still unclear to me why they would be considered a good hedge against inflation
    – nijshar28
    Commented Jul 18, 2022 at 14:32

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