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3 Funds to Buy on Solid Jump in Construction Spending
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Spending on construction activity in the United States is steadily gathering pace, a clear sign of cooling inflation and easing price pressures. Homebuilding, which was the mainstay of overall construction spending till inflation started taking its toll, is trying to bounce back.
This is once again driving spending on construction projects. Given this scenario, funds like Fidelity Real Estate Income Fund (FRIFX - Free Report) , DWS RREEF Real Estate Securities Fund- Class A (RRRAX - Free Report) and T. Rowe Price Global Real Estate Fund (TRGRX - Free Report) are likely to benefit in the near term.
Construction Spending Jumps Again
Spending on construction projects rose 0.6% in October, surpassing economists’ expectations of a rise of 0.4%, the Commerce Department said on Dec 1. Although data for September was revised down to an increase of 0.2% instead of the previously reported 0.4%, construction activity has been on the rise over the past few months.
Construction spending rose 10.7% in the first 10 months of the year.
Overall construction spending in October was driven by investments in private construction projects, which jumped 0.7%. Spending on residential construction projects rose 1.2% in October.
Spending on construction of single-family homes gained 1.1%. Robust spending on new single-family home construction contributed to breaking a streak of nine consecutive quarters of decline in residential investment during the third quarter.
Outlays on private non-residential structures such as factories advanced 0.1% in October. Investments in public construction projects saw a 0.2% jump. State and local government spending rose marginally by 0.1%. Spending on federal government projects soared a solid 2.2%.
The homebuilding market faced a significant setback as mortgage rates surged following the Federal Reserve's interest rate hikes last year. The homebuilding industry played a pivotal role in driving construction spending during the peak of the pandemic but has since seen a steep decline.
Both buyers and homebuilders grappled with increased challenges as the Federal Reserve raised interest rates by 525 basis points since March 2022.
Elevated raw material and labor costs have contributed to rising home prices, and the current 30-year fixed mortgage rate above 7% has added to the difficulty for potential buyers.
Despite these challenges, high demand remains due to a shortage of existing homes, leading to increased spending on private residential construction projects.
3 Best Choices
As a result, we've chosen three funds from the real estate sector that are worth buying. 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).
Fidelity Real Estate Income Fund invests its assets in preferred and common stocks of real estate investment trusts. FRIFX advisors also invest in securities of companies principally engaged in the real estate industry and other real estate-related investments.
Fidelity Real Estate Income Fund has a 5-year and 10-year annualized return of 3.3% and 2.8%, respectively. The annual expense ratio of 1.01% is lower than the category average of 1.08%. FRIFX 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.
DWS RREEF Real Estate Securities Fund- Class A seeks long-term capital appreciation and current income. RRRAX invests the majority of its net assets in equity securities of real estate investment trusts and real estate companies.
DWS RREEF Real Estate Securities Fund - Class A fund has a 5-year and 10-year annualized return of 2.9% and 2.7%, respectively. The annual expense ratio of 0.75% is lower than the category average of 1.08%. RRRAX sports 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.
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 0.7% and 0.3%, 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 Solid Jump in Construction Spending
Spending on construction activity in the United States is steadily gathering pace, a clear sign of cooling inflation and easing price pressures. Homebuilding, which was the mainstay of overall construction spending till inflation started taking its toll, is trying to bounce back.
This is once again driving spending on construction projects. Given this scenario, funds like Fidelity Real Estate Income Fund (FRIFX - Free Report) , DWS RREEF Real Estate Securities Fund - Class A (RRRAX - Free Report) and T. Rowe Price Global Real Estate Fund (TRGRX - Free Report) are likely to benefit in the near term.
Construction Spending Jumps Again
Spending on construction projects rose 0.6% in October, surpassing economists’ expectations of a rise of 0.4%, the Commerce Department said on Dec 1. Although data for September was revised down to an increase of 0.2% instead of the previously reported 0.4%, construction activity has been on the rise over the past few months.
Construction spending rose 10.7% in the first 10 months of the year.
Overall construction spending in October was driven by investments in private construction projects, which jumped 0.7%. Spending on residential construction projects rose 1.2% in October.
Spending on construction of single-family homes gained 1.1%. Robust spending on new single-family home construction contributed to breaking a streak of nine consecutive quarters of decline in residential investment during the third quarter.
Outlays on private non-residential structures such as factories advanced 0.1% in October. Investments in public construction projects saw a 0.2% jump. State and local government spending rose marginally by 0.1%. Spending on federal government projects soared a solid 2.2%.
The homebuilding market faced a significant setback as mortgage rates surged following the Federal Reserve's interest rate hikes last year. The homebuilding industry played a pivotal role in driving construction spending during the peak of the pandemic but has since seen a steep decline.
Both buyers and homebuilders grappled with increased challenges as the Federal Reserve raised interest rates by 525 basis points since March 2022.
Elevated raw material and labor costs have contributed to rising home prices, and the current 30-year fixed mortgage rate above 7% has added to the difficulty for potential buyers.
Despite these challenges, high demand remains due to a shortage of existing homes, leading to increased spending on private residential construction projects.
3 Best Choices
As a result, we've chosen three funds from the real estate sector that are worth buying. 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).
Fidelity Real Estate Income Fund invests its assets in preferred and common stocks of real estate investment trusts. FRIFX advisors also invest in securities of companies principally engaged in the real estate industry and other real estate-related investments.
Fidelity Real Estate Income Fund has a 5-year and 10-year annualized return of 3.3% and 2.8%, respectively. The annual expense ratio of 1.01% is lower than the category average of 1.08%. FRIFX 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.
DWS RREEF Real Estate Securities Fund- Class A seeks long-term capital appreciation and current income. RRRAX invests the majority of its net assets in equity securities of real estate investment trusts and real estate companies.
DWS RREEF Real Estate Securities Fund - Class A fund has a 5-year and 10-year annualized return of 2.9% and 2.7%, respectively. The annual expense ratio of 0.75% is lower than the category average of 1.08%. RRRAX sports 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.
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 0.7% and 0.3%, 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 >>