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3 Solid Funds to Buy on Rebounding Homebuilder Confidence
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The U.S. homebuilding market is making a solid rebound as mortgage rates continue to ease from multi-decade highs. Also, easing price pressure is leading buyers to the markets again. The upbeat sentiment has resulted in homebuilder confidence rebounding.
According to the National Association of Home Builders’ NABH/Wells Fargo Housing Market Index, homebuilder confidence rose to 51 in March from an unrevised 48 in February. Analysts predicted the confidence level to remain unchanged.
Also, the Census Bureau said on Mar 19 that building permits in February jumped 1.9% at a seasonally adjusted annual rate of 1,518,000 from January’s total of 1,489,000. Year over year, building permits grew a solid 2.4% in February.
Housing starts rose 10.7% month over month in February to 1,521,000. On a year-over-year basis, housing starts jumped 5.9%.
The housing market has suffered substantially over the past year owing to higher mortgage rates. The Federal Reserve has increased interest rates by 525 basis points since March 2022 to bring down sky-high inflation.
The Federal Reserve kept interest rates unchanged for the first time in June 2023. However, mortgage rates kept increasing, with the 30-year fixed mortgage rate climbing to 7.79%, to hit a 23-year high in October.
The Federal Reserve finally halted hiking interest rates in October as inflation eased. This saw the 30-year fixed mortgage rate gradually easing. The 30-year fixed mortgage rate averaged 6.74% for the week ended Mar 14.
Demand for single-family homes was already high and easing mortgage rates is once again driving sales. Homebuilder confidence is now riding high on optimism surrounding at least three rate cuts this year, which is expected to further ease price pressure.
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).
DWS RREEF Real Estate Securities Fund– Class A (RRRAX - Free Report) 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 3% and 4.3%, respectively. The annual expense ratio is 0.99%. 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 Real Estate (TRREX - Free Report) seeks to provide long-term growth through a combination of capital appreciation and current income. TRREX invests at least 80% of its net assets in equity securities of real estate companies.
T. Rowe Price Real Estate fund has a 5-year and 10-year annualized return of 4.5% and 2.8%, respectively. TRREX’s annual expense ratio is 0.86%. T. Rowe Price Real Estate fund carries 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.
Fidelity Real Estate Income Fund (FRINX - Free Report) seeks current income and capital appreciation. FRINX normally invests in a balanced portfolio of common stocks, U.S. and foreign government securities and a variety of corporate fixed-income obligations. Fidelity Real Estate Income Fund may invest up to 30% of its total assets in foreign securities.
Fidelity Real Estate Income Fund has a 5-year and 10-year annualized return of 2.4% and 3.8%, respectively. The annual expense ratio of 0.98%. FRINX 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.
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3 Solid Funds to Buy on Rebounding Homebuilder Confidence
The U.S. homebuilding market is making a solid rebound as mortgage rates continue to ease from multi-decade highs. Also, easing price pressure is leading buyers to the markets again. The upbeat sentiment has resulted in homebuilder confidence rebounding.
According to the National Association of Home Builders’ NABH/Wells Fargo Housing Market Index, homebuilder confidence rose to 51 in March from an unrevised 48 in February. Analysts predicted the confidence level to remain unchanged.
Also, the Census Bureau said on Mar 19 that building permits in February jumped 1.9% at a seasonally adjusted annual rate of 1,518,000 from January’s total of 1,489,000. Year over year, building permits grew a solid 2.4% in February.
Housing starts rose 10.7% month over month in February to 1,521,000. On a year-over-year basis, housing starts jumped 5.9%.
The housing market has suffered substantially over the past year owing to higher mortgage rates. The Federal Reserve has increased interest rates by 525 basis points since March 2022 to bring down sky-high inflation.
The Federal Reserve kept interest rates unchanged for the first time in June 2023. However, mortgage rates kept increasing, with the 30-year fixed mortgage rate climbing to 7.79%, to hit a 23-year high in October.
The Federal Reserve finally halted hiking interest rates in October as inflation eased. This saw the 30-year fixed mortgage rate gradually easing. The 30-year fixed mortgage rate averaged 6.74% for the week ended Mar 14.
Demand for single-family homes was already high and easing mortgage rates is once again driving sales. Homebuilder confidence is now riding high on optimism surrounding at least three rate cuts this year, which is expected to further ease price pressure.
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).
DWS RREEF Real Estate Securities Fund– Class A (RRRAX - Free Report) 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 3% and 4.3%, respectively. The annual expense ratio is 0.99%. 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 Real Estate (TRREX - Free Report) seeks to provide long-term growth through a combination of capital appreciation and current income. TRREX invests at least 80% of its net assets in equity securities of real estate companies.
T. Rowe Price Real Estate fund has a 5-year and 10-year annualized return of 4.5% and 2.8%, respectively. TRREX’s annual expense ratio is 0.86%. T. Rowe Price Real Estate fund carries 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.
Fidelity Real Estate Income Fund (FRINX - Free Report) seeks current income and capital appreciation. FRINX normally invests in a balanced portfolio of common stocks, U.S. and foreign government securities and a variety of corporate fixed-income obligations. Fidelity Real Estate Income Fund may invest up to 30% of its total assets in foreign securities.
Fidelity Real Estate Income Fund has a 5-year and 10-year annualized return of 2.4% and 3.8%, respectively. The annual expense ratio of 0.98%. FRINX 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.
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 >>