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3 Top Real Estate Funds to Gain Record Low Mortgage Rates
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The U.S. economy is slowly recovering from the pandemic, despite the rising number of coronavirus cases in the country. The homebuilding industry, in particular, has demonstrated remarkable strength over the past few weeks and could continue to do so ahead, thanks to the record low mortgage rates, a low interest rate environment and more construction activity in the country.
This is why mutual fund investors could consider real estate at the moment, to benefit the most from the aforementioned trends.
Record New Low for 30-Year Mortgage Rate
The 30-year fixed-rate mortgage averaged 3.07% for the week ended Jul 2, according to Freddie Mac. The reported figure was much lower than the average rate of 3.75% from the year-ago period. In fact, the average of 3.07% is a record new low for the 30-year mortgage rate.
Considering that just two weeks ago, the benchmark 30-year mortgage rate had stooped to its previous record low of 3.13%, one may deduce that the pandemic is putting pressure on the real estate industry. To make the picture clearer, one may note that mortgage rates have dropped to historic lows many times so far this year, owing to the pandemic-hit economy.
A major reason why mortgage rates are so low is the low-rate environment in the country. In June, the central bank decided to keep the federal funds rate unchanged in mid-March to put the economy back on track. The rates, which are currently in the range of 0% to 0.25%, are expected to stay at this level for the next two and a half years.
Per the U.S. Census Bureau and Department of Housing and Urban Development, new residential salesfor the month of May (reported at 676,000) were 16.6% higher than the revised April rate of 580,000. In addition, the said figure is 12.7% higher than the May 2019 estimate of 600,000. This is yet another effect of the low-rate environment.
In addition, an uptick in construction activity was also witnessed in the sector’s new employment in May and June. New job additions in the country were remarkable over the months mentioned, with construction employment increasing by 158,000 in June, following a gain of 453,000 in May, per the U.S. Bureau of Labor Statistics.
Finally, to further affirm the growth in homebuilding sector, one may note that pending home sales made a record comeback in May, according to the National Association of Realtors. The Pending Home Sales Index, which is a forward-looking indicator of home sales based on contract signings, rose 44.3% to 99.6 in May.
3 Funds to Buy
We have, therefore, selected three real estate mutual funds that stand to gain from record low mortgage rates. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
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).
TIAA-CREF Real Estate Securities Fund Premier Class (TRRPX - Free Report) aims to increase capital appreciation and current income by aiming for favorable total return. The fund invests the majority of its assets in securities of companies engaged in various operations in the real estate industry. The fund may invest a smaller portion of its assets in real estate securities of non-U.S. issuers as well.
This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TRRPX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.66%, which is below the category average of 1.19%. It has returned 6.3% over the past 3 years. The fund has no minimum initial investment.
TIAA-CREF Real Estate Securities Fund Retail Class (TCREX - Free Report) aims for good total return over the long term through capital growth and current income. The fund invests mostly in equity securities of companies in the real estate industry. It invests in securities of U.S. and non-U.S. issuers alike. The product may also invest a smaller portion of its assets in securities of issuers that aren’t engaged in operations of or related to the real estate industry.
This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TCREX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.81%, which is below the category average of 1.19%. It has returned 6.2% over the past 3 years. The fund has a minimum initial investment of $2500.
Principal Real Estate Securities Fund Class R-6 (PFRSX - Free Report) aims for total return. The fund invests the majority of its assets in securities of companies engaged in operations in the real estate industry. The non-diversified fund mostly invests in value equity securities.
This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PFRSX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.81%, which is below the category average of 1.19%. It has returned 4.4% over the past 3 years. The fund has no minimum initial investment.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.
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3 Top Real Estate Funds to Gain Record Low Mortgage Rates
The U.S. economy is slowly recovering from the pandemic, despite the rising number of coronavirus cases in the country. The homebuilding industry, in particular, has demonstrated remarkable strength over the past few weeks and could continue to do so ahead, thanks to the record low mortgage rates, a low interest rate environment and more construction activity in the country.
This is why mutual fund investors could consider real estate at the moment, to benefit the most from the aforementioned trends.
Record New Low for 30-Year Mortgage Rate
The 30-year fixed-rate mortgage averaged 3.07% for the week ended Jul 2, according to Freddie Mac. The reported figure was much lower than the average rate of 3.75% from the year-ago period. In fact, the average of 3.07% is a record new low for the 30-year mortgage rate.
Considering that just two weeks ago, the benchmark 30-year mortgage rate had stooped to its previous record low of 3.13%, one may deduce that the pandemic is putting pressure on the real estate industry. To make the picture clearer, one may note that mortgage rates have dropped to historic lows many times so far this year, owing to the pandemic-hit economy.
A major reason why mortgage rates are so low is the low-rate environment in the country. In June, the central bank decided to keep the federal funds rate unchanged in mid-March to put the economy back on track. The rates, which are currently in the range of 0% to 0.25%, are expected to stay at this level for the next two and a half years.
Per the U.S. Census Bureau and Department of Housing and Urban Development, new residential salesfor the month of May (reported at 676,000) were 16.6% higher than the revised April rate of 580,000. In addition, the said figure is 12.7% higher than the May 2019 estimate of 600,000. This is yet another effect of the low-rate environment.
In addition, an uptick in construction activity was also witnessed in the sector’s new employment in May and June. New job additions in the country were remarkable over the months mentioned, with construction employment increasing by 158,000 in June, following a gain of 453,000 in May, per the U.S. Bureau of Labor Statistics.
Finally, to further affirm the growth in homebuilding sector, one may note that pending home sales made a record comeback in May, according to the National Association of Realtors. The Pending Home Sales Index, which is a forward-looking indicator of home sales based on contract signings, rose 44.3% to 99.6 in May.
3 Funds to Buy
We have, therefore, selected three real estate mutual funds that stand to gain from record low mortgage rates. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
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).
TIAA-CREF Real Estate Securities Fund Premier Class (TRRPX - Free Report) aims to increase capital appreciation and current income by aiming for favorable total return. The fund invests the majority of its assets in securities of companies engaged in various operations in the real estate industry. The fund may invest a smaller portion of its assets in real estate securities of non-U.S. issuers as well.
This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TRRPX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.66%, which is below the category average of 1.19%. It has returned 6.3% over the past 3 years. The fund has no minimum initial investment.
TIAA-CREF Real Estate Securities Fund Retail Class (TCREX - Free Report) aims for good total return over the long term through capital growth and current income. The fund invests mostly in equity securities of companies in the real estate industry. It invests in securities of U.S. and non-U.S. issuers alike. The product may also invest a smaller portion of its assets in securities of issuers that aren’t engaged in operations of or related to the real estate industry.
This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TCREX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.81%, which is below the category average of 1.19%. It has returned 6.2% over the past 3 years. The fund has a minimum initial investment of $2500.
Principal Real Estate Securities Fund Class R-6 (PFRSX - Free Report) aims for total return. The fund invests the majority of its assets in securities of companies engaged in operations in the real estate industry. The non-diversified fund mostly invests in value equity securities.
This Zacks sector – Real Estate has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PFRSX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.81%, which is below the category average of 1.19%. It has returned 4.4% over the past 3 years. The fund has no minimum initial investment.
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