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Residential Construction Picks Up Amid Pandemic: 4 Fund Picks
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As new coronavirus cases keep rising, signaling an impending second wave, the economy is under constant pressure as a suitable vaccine is still out of picture. While all major sectors of the economy suffer the effects of the pandemic, the housing sector has stood strong and made a comeback from its recent slump.
Per a Mansionglobal article, according to the Urban Land Institute report, the housing market conditions are expected to rebound through “in 2021 and trend even higher in 2022.” In fact, single-family homes are expected to outperform commercial, retail, hotel and rental constructions. The pandemic, which has forced people to stay at home, has also accelerated migration or a trend in people to move out of big cities and settle in the suburbs with more space. Hence, many have opted to move out of high-tax, expensive states such as New York, California and Massachusetts and migrate to states with more space and affordability.
In a report by Redfin.com, cited in the aforementioned article, in third-quarter of 2020, nearly 47,000 more people used Redfin to move out of New York than to move in. Redfin economist Taylor Marr says that people, especially remote workers are looking for wide-open spaces, sunshine and affordable homes, instead of ultra-expensive housing in New York City.
Even other housing data point toward this trend and rising demand for single homes. Per the U.S. Census Bureau’s report on Nov 2, construction spending during September rose 0.3% or $1,414 billion. Although the growth lags the consensus estimate of 0.9%, spending on residential construction has jumped 2.7% in the reported month, which helped private construction spending edge up 0.9% for September.
Persistently Low Mortgage Rate – a Bonus
The low mortgage rate has also been an added bonus to homebuyers in this pandemic. Thanks to the Federal Reserve’s rapid rate cuts to prop up the U.S. economy, interest rate now stands near zero (0.00–0.25%), as of Mar 15, 2020. This impacted mortgage rates and pushed the borrowing cost down to historic lows. Per Freddie Mac’s report, the 30-year fixed-rate mortgage has been around 2.8-2.81% in the past three weeks, hitting a record low for the 11th time this year in the week ending Oct 22. Hence, despite the consistent economic turbulence during the coronavirus pandemic, this historically-low borrowing cost has fueled the housing space.
Top 4 Fund Picks
Given the current scenario, we have shortlisted four mutual funds from the housing space carrying a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Neuberger Berman Real Estate Fund Class R6 (NRREX - Free Report) aims for total return and also gives importance to capital appreciation and current income. Majority of this non-diversified fund’s assets are invested in equity securities of real estate investment trusts and real estate companies.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 6.4% and 7.9% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NRREX has an annual expense ratio of 0.76%, which is below the category average of 1.19%.
MFS Global Real Estate Fund Class R6 (MGLRX - Free Report) aims for total return. The fund invests majority of assets in equity securities of U.S. and foreign real estate-related investments of any size.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 5.5% and 7.4% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
MGLRX has an annual expense ratio of 0.90%, which is below the category average of 1.24%.
Fidelity Advisor Real Estate Income Fund Class A (FRINX - Free Report) aims for higher-than-average income. As a secondary objective, the fund seeks capital growth. FRINX invests majority of its assets in common stocks of REITs as well as securities of companies principally engaged in the real estate industry and other real estate-related investments.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 1.9% and 4.8 % over the past three and five years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FRINX has an annual expense ratio of 1.01%, which is below the category average of 1.19%.
Cohen & Steers Real Estate Securities Fund, Inc. Class Z (CSZIX - Free Report) aims for total return by investing in securities of real estate companies. This non-diversified fund invests majority of its assets in income-producing common stocks and other similar equity securities.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 4.9% and 7.2% over the past three and five years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSZIX has an annual expense ratio of 0.77%, which is below the category average of 1.19%.
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Residential Construction Picks Up Amid Pandemic: 4 Fund Picks
As new coronavirus cases keep rising, signaling an impending second wave, the economy is under constant pressure as a suitable vaccine is still out of picture. While all major sectors of the economy suffer the effects of the pandemic, the housing sector has stood strong and made a comeback from its recent slump.
Per a Mansionglobal article, according to the Urban Land Institute report, the housing market conditions are expected to rebound through “in 2021 and trend even higher in 2022.” In fact, single-family homes are expected to outperform commercial, retail, hotel and rental constructions. The pandemic, which has forced people to stay at home, has also accelerated migration or a trend in people to move out of big cities and settle in the suburbs with more space. Hence, many have opted to move out of high-tax, expensive states such as New York, California and Massachusetts and migrate to states with more space and affordability.
In a report by Redfin.com, cited in the aforementioned article, in third-quarter of 2020, nearly 47,000 more people used Redfin to move out of New York than to move in. Redfin economist Taylor Marr says that people, especially remote workers are looking for wide-open spaces, sunshine and affordable homes, instead of ultra-expensive housing in New York City.
Even other housing data point toward this trend and rising demand for single homes. Per the U.S. Census Bureau’s report on Nov 2, construction spending during September rose 0.3% or $1,414 billion. Although the growth lags the consensus estimate of 0.9%, spending on residential construction has jumped 2.7% in the reported month, which helped private construction spending edge up 0.9% for September.
Persistently Low Mortgage Rate – a Bonus
The low mortgage rate has also been an added bonus to homebuyers in this pandemic. Thanks to the Federal Reserve’s rapid rate cuts to prop up the U.S. economy, interest rate now stands near zero (0.00–0.25%), as of Mar 15, 2020. This impacted mortgage rates and pushed the borrowing cost down to historic lows. Per Freddie Mac’s report, the 30-year fixed-rate mortgage has been around 2.8-2.81% in the past three weeks, hitting a record low for the 11th time this year in the week ending Oct 22. Hence, despite the consistent economic turbulence during the coronavirus pandemic, this historically-low borrowing cost has fueled the housing space.
Top 4 Fund Picks
Given the current scenario, we have shortlisted four mutual funds from the housing space carrying a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Neuberger Berman Real Estate Fund Class R6 (NRREX - Free Report) aims for total return and also gives importance to capital appreciation and current income. Majority of this non-diversified fund’s assets are invested in equity securities of real estate investment trusts and real estate companies.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 6.4% and 7.9% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NRREX has an annual expense ratio of 0.76%, which is below the category average of 1.19%.
MFS Global Real Estate Fund Class R6 (MGLRX - Free Report) aims for total return. The fund invests majority of assets in equity securities of U.S. and foreign real estate-related investments of any size.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 5.5% and 7.4% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
MGLRX has an annual expense ratio of 0.90%, which is below the category average of 1.24%.
Fidelity Advisor Real Estate Income Fund Class A (FRINX - Free Report) aims for higher-than-average income. As a secondary objective, the fund seeks capital growth. FRINX invests majority of its assets in common stocks of REITs as well as securities of companies principally engaged in the real estate industry and other real estate-related investments.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 1.9% and 4.8 % over the past three and five years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FRINX has an annual expense ratio of 1.01%, which is below the category average of 1.19%.
Cohen & Steers Real Estate Securities Fund, Inc. Class Z (CSZIX - Free Report) aims for total return by investing in securities of real estate companies. This non-diversified fund invests majority of its assets in income-producing common stocks and other similar equity securities.
This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 4.9% and 7.2% over the past three and five years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSZIX has an annual expense ratio of 0.77%, which is below the category average of 1.19%.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>