The real estate sector in the United States is exhibiting impressive strength and resilience, as demonstrated by the most recent data from the U.S. Census Bureau and the Department of Housing and Urban Development. Building permits and housing starts in May surpassed market projections, revealing a favorable outlook for both the housing industry and the broader economy.

In May, building permits, which serve as a reliable indicator of future construction activity, were issued for an impressive 1.491 million units, slightly higher than the estimate of 1.410 million units. Furthermore, the April metric saw an upward revision from 1.416 million units to 1.417 million units, hinting at a consistent growth trajectory in the construction industry. Such data showcases developers' and builders' unwavering confidence in market conditions, thus indicating robust demand and bright prospects for expansion.

May saw the strong performance of building permits and housing starts, which exceeded expectations. According to the latest data, there were a total of 1.631 million new residential construction projects initiated during the month, well above the consensus estimate of 1.400 million units. Moreover, April's figures were revised upward to 1.401 million units from the previously reported 1.340 million units, indicating an increase in momentum for this key metric that helps assess the overall health of the housing sector.

The noteworthy growth in building permits and housing starts can be attributed to various factors driving the real estate sector. First, historically low mortgage rates have made home ownership more affordable, attracting potential buyers to the market. These favorable financing conditions have stimulated demand for housing and contributed to the growth in construction activity.

The housing sector's positive performance has far-reaching implications for the overall economy. As construction activity increases, employment opportunities arise, boosting the labor market and related industries. Not only do these construction projects drive consumer spending and support economic growth but they also enhance homeowners' confidence by elevating their properties' value as tangible assets. This helps to increase household wealth levels, driving even more spending and economic activity.

In the United States, the data on building permits and housing starts surpassed market expectations, signaling a robust demand for housing while demonstrating confidence among industry stakeholders. With historically low mortgage rates, positive demographic trends, and an emphasis on comfortable living spaces, the real estate sector is poised for continued success.

Investing in Real Estate Mutual Funds seems to be judicious as of now. Also, mutual funds, in general, diversify portfolios without several commission charges that are mainly associated with stock purchases and lower transaction costs (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

We have, thus, chosen three Real Estate Mutual Funds that investors should buy now for the long term. These funds possess a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and expense ratios considerably lower than the category average. So, these funds have provided comparatively strong performance along with lower fees.

T. Rowe Price Real Estate Fund (TRREX Quick QuoteTRREX - Free Report) aims to provide long-term growth through a combination of capital appreciation and current income. It generally invests in equity securities of real estate companies and in foreign securities.

Nina P. Jones has been the lead manager of TRREX since Dec 31, 2018. Most of the fund’s holdings were in companies like American Tower Corporation (7.7%), Prologis, Inc. (6.9%), and Equinix, Inc. (6.2%) as of Dec 31, 2022.

TRREX’s 3-year and 5-year annualized returns are 7.3% and 2%, respectively. Its net expense ratio is 0.82% compared with the category average of 1.08%. TRREX has a Zacks Mutual Fund Rank #1.

To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

VY CBRE Global Real Estate Portfolio (IRGIX Quick QuoteIRGIX - Free Report) invests most of its assets in equity securities of companies that are primarily involved in the real estate industry. IRGIX advisors invest half of their assets in real estate activities and the other half in real estate.

Joseph P. Smith has been the lead manager of IRGIX since Feb 27, 2007. Most of the fund’s holdings were in companies like Prologis, Inc (9.3%), Equinix, Inc. (7%), and Simon Property Group, Inc (6.9%) as of Dec 31, 2022.

IRGIX’s 3-year and 5-year annualized returns are 6.5% and 2.5%, respectively. Its net expense ratio is 0.87% compared with the category average of 1.21%. IRGIX has a Zacks Mutual Fund Rank #1.

MainStay CBRE Real Estate Fund (VREQX Quick QuoteVREQX - Free Report) invests most of its assets in common and preferred stocks of U.S. real estate investment trusts. Its advisors generally invest in various market capitalizations.

Joseph P. Smith has been the lead manager of VREQX since Dec 30, 2019. Most of the fund’s holdings were in companies like Prologis, Inc (9.7%), Equinix, Inc . (6.8%), and Crown Castle Inc. (6.3%) as of Jan 31, 2023.

VREQX’s 3-year and 5-year returns are 8.8% and 5.1%, respectively. The annual expense ratio is 0.74% compared with the category average of 1.08%. VREQX has a Zacks Mutual Fund Rank #2.

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 >>