After struggling for more than a year, the U.S. housing market appears to be finally rebounding. The homebuilding industry, which flourished during the pandemic, took a major blow last year as the Fed continued to raise interest rates. Higher mortgage rates inflated home prices, which saw demand for homes sink.

However, sales are finally rebounding despite high interest rates and the price issues for the industry. The most recent figures show that existing and pending house sales have been increasing, and that the industry is on course for a gradual rebound. Thus, funds like Fidelity Real Estate Investment Portfolio (FRESX Quick QuoteFRESX - Free Report) , Northern Multi-Manager Global Real Estate Fund (NMMGX Quick QuoteNMMGX - Free Report) and T. Rowe Price Global Real Estate Fund (TRGRX Quick QuoteTRGRX - Free Report) are likely to benefit in the near term.

Home Sales Rebounding

The National Association of Realtors (NAR), in its Mar 29 report, said that pending home sales rose 0.8% in February for the third straight month. Also, this is the highest level since August 2022, and the numbers are far higher than analysts' projections of a 3% decline.

However, sales were down 21.1% from a year ago. With the exception of West, all other regions witnessed a month-over-month jump in pending home sales.

According to data from the mortgage financing corporation, Freddie Mac, the surprising increase in pending house sales came despite a hike in mortgage rates from early February to early March. Mortgage rates largely declined from November till the most recent uptick.

Given that these sales data are based on closings, the contracts were most likely signed sometime between the end of 2022 and January, when mortgage rates fell dramatically.

This comes as existing home sales also jumped in February. The National Association of Realtors reported on Mar 21 that existing home sales increased 14.5% in February on a month-over-month basis. Also, existing home sales climbed for the first time in the past 12 months, which is proof that demand for housing is once again on the rise.

The homebuilding industry has been suffering for a long time. The cost of labor and raw materials has been rising since 2021, driving up the price of homes. If that wasn't enough, the Fed began aggressively raising interest rates in 2022 to combat inflation that was at an all-time high.

Although the homebuilding business continues to face challenges like price issues and increasing mortgage rates, sales are being boosted by rising demand. American citizens also appear to be regaining their lost confidence. According to data released by the Conference Board on Mar 28, the Consumer Confidence Index increased to 104.2 in March from a downwardly revised 103.4 in February.

3 Best Choices

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).

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 3.6% and 6.8%, 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.

Northern Multi-Manager Global Real Estate Fund aims for long-term capital growth and current income. NMMGX invests the majority of its assets in equity securities of real estate companies and those related to the real estate industry. Northern Multi-Manager Global Real Estate Fund may invest in securities of companies around the world.

Northern Multi-Manager Global Real Estate Fund has a 5-year and 10-year annualized return of 0.6% and 3.7%, respectively. The annual expense ratio of 0.91% is lower than the category average of 1.21%. NMMGX has a Zacks Mutual Fund Rank #2.

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 0.4% and 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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