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3 Funds to Buy on Steady Rise in Construction Spending
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Spending on construction projects has witnessed a steady rise in recent months, even in the face of rising prices and multi-year high inflation. However, the latest data has hinted that inflation is starting to ease, and investors are hopeful that the Fed might consider pausing its interest rate hikes in its upcoming June meeting.
According to the latest data released by the Commerce Department, construction spending saw an impressive jump in April, marking the second straight month of growth. The surge in spending was primarily fueled by investments in private projects. Concurrently, data related to homebuilding showed a decline in home prices, which, in turn, led to a rise in the sales of new homes.
Thus, funds like Nuveen Real Estate Securities A (FREAX - Free Report) , Fidelity Real Estate Investment Portfolio (FRESX - Free Report) and T. Rowe Price Global Real Estate Fund (TRGRX - Free Report) are likely to benefit in the near term.
Construction Spending Rises
On Jun 1, the Commerce Department reported that spending on construction projects in the United States rose a significant 1.2% in April. This surpassed economists’ expectations of a 0.2% rise and follows 0.3% growth in construction spending in March.
Comparing the data to the previous year, construction spending in April saw a notable rise of 7.2%. Private construction projects accounted for a substantial portion of this increase, with spending jumping by 1.3%. Notably, spending on private nonresidential projects, such as gas and oil well drilling, saw robust growth of 2.4%.
Moreover, the homebuilding industry, which had been adversely affected by the Fed’s steep rate hike stance in a bid to control surging inflation, has also been showing signs of recovery. Spending on residential construction increased 0.5%, while spending on multi-family housing projects rose 0.6% in May.
Additionally, spending on public construction projects saw an increase of 1.1% in May.
During the peak of the pandemic, the homebuilding industry played a crucial role in bolstering the construction sector as home sales reached record levels. However, the Fed’s aggressive interest rate hike policy aimed at tackling high inflation had a dampening effect on home sales. The subsequent rise in mortgage rates directly impacted buyers, leading them to delay or reconsider their plans to purchase new homes.
Nevertheless, there have been positive developments in recent times. Inflation has shown signs of easing, and spending on residential projects has been gaining momentum.
According to the Commerce Department's report from last month, new home sales surged to a 13-month high in April. New home sales rose 4.1%, reaching a seasonally adjusted annual rate of 683,000 units, which marked the highest level since 2022. These figures indicate a positive trend and renewed interest in the housing market.
New home sales are considered a leading indicator of the housing market since they reflect contract signings at the time of purchase. Economists had forecast new home sales to decline to a rate of 665,000 in April. Year-over-year, new home sales jumped 11.8%, indicating a positive trend in the housing market.
In addition to the rise in new home sales, separate data indicated an increase in permits for future single-family homes during April. This suggests optimism and confidence among builders regarding future construction activity.
Furthermore, the confidence among homebuilders, which had previously hit a low point, rebounded to a 10-month high in May. These positive indicators collectively point to a potential recovery and improved sentiment within the housing market.
3 Best Choices
As a result, we've chosen three such funds from the real estate sector that are worth buying. Moreover, these funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Nuveen Real Estate Securities A fund seeks growth of income and capital for the long run. FREAX invests the lion’s share of its assets in income-generating securities of companies involved in the real estate industry. Nuveen Real Estate Securities A fund aims to invest mainly in equity REITs, but may also invest in all the three types of REITs.
Nuveen Real Estate Securities A fund has three and five-year annualized returns of 5.7% and 3.8%, respectively. FREAX carries an expense ratio of 0.97% compared with the category average of 1.08%. Nuveen Real Estate Securities A fund carries a Zacks Mutual Fund Rank #2.
Fidelity Real Estate Investment Portfolio fund aims for above-average income and long-term capital growth, consistent with reasonable investment risk. The majority of FRESX’s assets are invested in securities of companies principally engaged in the real estate industry and other real estate-related investments.
Fidelity Real Estate Investment Portfolio fund has three and five-year annualized returns of 5.8% and 3.9%, respectively. FRESX carries an expense ratio of 0.71% compared with the category average of 1.08%. Fidelity Real Estate Investment Portfolio carries a Zacks Mutual Fund Rank #1.
T. Rowe Price Global Real Estate Fund seeks appreciation of capital and current income over the long term. TRGRX primarily invests its assets (including any borrowings for investment purposes) in equity securities of real estate businesses around the world, including those in the United States. T. Rowe Price Global Real Estate Fund is a non-diversified fund.
T. Rowe Price Global Real Estate Fund has a 5-year and 10-year annualized return of 3.8% and 1.2%, respectively. The annual expense ratio of 0.95% is lower than the category average of 1.21%. TRGRX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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3 Funds to Buy on Steady Rise in Construction Spending
Spending on construction projects has witnessed a steady rise in recent months, even in the face of rising prices and multi-year high inflation. However, the latest data has hinted that inflation is starting to ease, and investors are hopeful that the Fed might consider pausing its interest rate hikes in its upcoming June meeting.
According to the latest data released by the Commerce Department, construction spending saw an impressive jump in April, marking the second straight month of growth. The surge in spending was primarily fueled by investments in private projects. Concurrently, data related to homebuilding showed a decline in home prices, which, in turn, led to a rise in the sales of new homes.
Thus, funds like Nuveen Real Estate Securities A (FREAX - Free Report) , Fidelity Real Estate Investment Portfolio (FRESX - Free Report) and T. Rowe Price Global Real Estate Fund (TRGRX - Free Report) are likely to benefit in the near term.
Construction Spending Rises
On Jun 1, the Commerce Department reported that spending on construction projects in the United States rose a significant 1.2% in April. This surpassed economists’ expectations of a 0.2% rise and follows 0.3% growth in construction spending in March.
Comparing the data to the previous year, construction spending in April saw a notable rise of 7.2%. Private construction projects accounted for a substantial portion of this increase, with spending jumping by 1.3%. Notably, spending on private nonresidential projects, such as gas and oil well drilling, saw robust growth of 2.4%.
Moreover, the homebuilding industry, which had been adversely affected by the Fed’s steep rate hike stance in a bid to control surging inflation, has also been showing signs of recovery. Spending on residential construction increased 0.5%, while spending on multi-family housing projects rose 0.6% in May.
Additionally, spending on public construction projects saw an increase of 1.1% in May.
During the peak of the pandemic, the homebuilding industry played a crucial role in bolstering the construction sector as home sales reached record levels. However, the Fed’s aggressive interest rate hike policy aimed at tackling high inflation had a dampening effect on home sales. The subsequent rise in mortgage rates directly impacted buyers, leading them to delay or reconsider their plans to purchase new homes.
Nevertheless, there have been positive developments in recent times. Inflation has shown signs of easing, and spending on residential projects has been gaining momentum.
According to the Commerce Department's report from last month, new home sales surged to a 13-month high in April. New home sales rose 4.1%, reaching a seasonally adjusted annual rate of 683,000 units, which marked the highest level since 2022. These figures indicate a positive trend and renewed interest in the housing market.
New home sales are considered a leading indicator of the housing market since they reflect contract signings at the time of purchase. Economists had forecast new home sales to decline to a rate of 665,000 in April. Year-over-year, new home sales jumped 11.8%, indicating a positive trend in the housing market.
In addition to the rise in new home sales, separate data indicated an increase in permits for future single-family homes during April. This suggests optimism and confidence among builders regarding future construction activity.
Furthermore, the confidence among homebuilders, which had previously hit a low point, rebounded to a 10-month high in May. These positive indicators collectively point to a potential recovery and improved sentiment within the housing market.
3 Best Choices
As a result, we've chosen three such funds from the real estate sector that are worth buying. Moreover, these funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Nuveen Real Estate Securities A fund seeks growth of income and capital for the long run. FREAX invests the lion’s share of its assets in income-generating securities of companies involved in the real estate industry. Nuveen Real Estate Securities A fund aims to invest mainly in equity REITs, but may also invest in all the three types of REITs.
Nuveen Real Estate Securities A fund has three and five-year annualized returns of 5.7% and 3.8%, respectively. FREAX carries an expense ratio of 0.97% compared with the category average of 1.08%. Nuveen Real Estate Securities A fund carries a Zacks Mutual Fund Rank #2.
To view the Zacks Rank and past performance of all real estate funds, investors can click here to see the complete list of funds.
Fidelity Real Estate Investment Portfolio fund aims for above-average income and long-term capital growth, consistent with reasonable investment risk. The majority of FRESX’s assets are invested in securities of companies principally engaged in the real estate industry and other real estate-related investments.
Fidelity Real Estate Investment Portfolio fund has three and five-year annualized returns of 5.8% and 3.9%, respectively. FRESX carries an expense ratio of 0.71% compared with the category average of 1.08%. Fidelity Real Estate Investment Portfolio carries a Zacks Mutual Fund Rank #1.
To view the Zacks Rank and past performance of all real estate funds, investors can click here to see the complete list of funds.
T. Rowe Price Global Real Estate Fund seeks appreciation of capital and current income over the long term. TRGRX primarily invests its assets (including any borrowings for investment purposes) in equity securities of real estate businesses around the world, including those in the United States. T. Rowe Price Global Real Estate Fund is a non-diversified fund.
T. Rowe Price Global Real Estate Fund has a 5-year and 10-year annualized return of 3.8% and 1.2%, respectively. The annual expense ratio of 0.95% is lower than the category average of 1.21%. TRGRX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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 >>