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The U.S. housing sector roared back to life last month, shrugging off the effect of two devastating hurricanes. Existing home sales in the United States skyrocketed to an 11-year high in November, while housing starts hit a 10-year high on the back of robust demand fueled by near full-employment.
Moreover, the index of home builder sentiment touched an 18-year high in December. With unemployment lingering near a 17-year low and wage growth picking up, we believe that there cannot be a better time to invest in real estate stocks.
Existing Home Sales at an 11-Year High
As per the National Association of Realtors, existing home sales for the month of November increased 5.6% to 5.81 million units in November to hit an 11-year high. Such a record high was achieved after areas in the South, which were ravaged by hurricanes Irma and Harvey, continued to recover. This reading is the highest since December 2006 and follows a surge of 5.5 million units in October.
Existing home sales, which account for 90% of home sales in the United States, surged 3.8% year over year in November. Home sales in the South rose 8.3%, 8.4% in the Midwest and 6.7% in the Northeast. Chronic shortage of houses and robust demand for the same led to an elevation in prices primarily for first-time buyers, who constitute about 29% of the total number of buyers.
As per the Commerce department, housing starts for the month of November rose 3.3% to 1.3 million units, its highest level in a decade. Such an increase is indicative of the fact that the domestic housing market is bouncing back after being crippled by supply shortage.
Single-family home-building and permits also rose to a 10-year high in November. The figure increased 5.3% to 930,000 units to hit its highest level since September 2007. Such a high was achieved on the back of robust demand for housing due to near full-employment in the economy.
Home-Builders’ Confidence Hits 18-Year High
The index of home builder sentiment increased five points in December to 74 from the previous month. Any reading above 50 is considered positive. Moreover, this is the highest level recorded since 1999. The index logged in a reading of 69 a year ago in December.
Of the index's three components, current sales conditions surged four points to 81. Buyer traffic increased eight points to 58, coming in the positive territory for the second straight month. Further, sales prediction over the next six months rose three points to 79.
Such growth has primarily been achieved on the back of strong expectations from economic improvement. Interestingly, likely changes to the mortgage interest and property tax deductions under the GOP Tax Bill have weighed on homebuilders sentiment as it would remove the benefits a homeowner enjoys. However, business incentives in the tax plan actually overshadowed all other negatives and led to a surge in homebuilders’ confidence.
Top 5 Real Estate Funds To Buy Now
A slew of positive data points indicate that there are ample reasons to be optimistic about the broader housing sector. Moreover, the hurricane season is almost over while wages and economic growth continue to pick up. Therefore, adding some real estate funds to your portfolio would be prudent at this point.
The question that arises now is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without 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).
Here, we have highlighted five real estate mutual funds flaunting a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). Moreover, these funds have encouraging one-year and YTD returns. Additionally, the minimum initial investment is within $5000 and net assets are above $50 million.
Fidelity Advisor International Real Estate Fund Class I (FIRIX - Free Report) seeks to invest primarily in foreign securities. The fund invests a bulk of its assets in securities of companies involved in the real estate industry as well as real estate-related investments. It allocates investments across the globe in different countries and regions.
FIRIX has an annual expense ratio of 0.95%, which is below the category average of 1.34%. The fund has one-year and YTD returns of 27.1% and 25.1%, respectively. It holds a Zacks Mutual Fund Rank #1.
TIAA-CREF Real Estate Securities Retirement (TRRSX - Free Report) seeks maximum total returns over the long run through growth of capital and current income. TRRSX invests a large chunk of its assets in companies primarily involved in operations related to the real estate domain. The fund may invest a maximum of 15% of its assets in securities issued by foreign entities.
TRRSX has an annual expense ratio of 0.75%, which is below the category average of 1.22%. The fund has one-year and YTD returns of 14.8% and 13.5%, respectively. It holds a Zacks Mutual Fund Rank #1.
Fidelity Real Estate Investment Portfolio Fund (FRESX - Free Report) seeks above-average income and long-term capital growth consistent with reasonable investment risk. FRESX seeks to provide a yield that exceeds the composite yield of the Standard and Poor's 500 Index. FRESX normally invests at least 80% of the fund's total assets in equity securities of companies principally engaged in the real estate industry and other real estate-related investments.
FRESX has an annual expense ratio of 0.76%, which is below the category average of 1.22%. The fund has one-year and YTD returns of 4.5% and 3.7%, respectively. It holds a Zacks Mutual Fund Rank #2.
Principal Real Estate Securities R5 (PREPX - Free Report) seeks growth of total returns. PREPX invests the lion’s share of its assets in equity securities of real estate companies. The fund focuses on value equity securities.
PREPX has an annual expense ratio of 1.08%, which is below the category average of 1.22%. The fund has one-year and YTD returns of 12% and 10.3%, respectively. It holds a Zacks Mutual Fund Rank #2.
John Hancock II Real Estate Securities 1 (JIREX - Free Report) seeks appreciation of capital and income over the long term. JIREX invests primarily in equity securities of companies engaged in operations related to the real estate sector, which also include REITs. The fund invests in securities including common stock, preferred stock and convertible securities. It may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory.
JIREX has an annual expense ratio of 0.79%, which is below the category average of 1.22%. The fund has one-year and YTD returns of 9.5% and 7.7%, respectively. It holds a Zacks Mutual Fund Rank #1.
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5 Funds to Pick on Sensational Housing Data
The U.S. housing sector roared back to life last month, shrugging off the effect of two devastating hurricanes. Existing home sales in the United States skyrocketed to an 11-year high in November, while housing starts hit a 10-year high on the back of robust demand fueled by near full-employment.
Moreover, the index of home builder sentiment touched an 18-year high in December. With unemployment lingering near a 17-year low and wage growth picking up, we believe that there cannot be a better time to invest in real estate stocks.
Existing Home Sales at an 11-Year High
As per the National Association of Realtors, existing home sales for the month of November increased 5.6% to 5.81 million units in November to hit an 11-year high. Such a record high was achieved after areas in the South, which were ravaged by hurricanes Irma and Harvey, continued to recover. This reading is the highest since December 2006 and follows a surge of 5.5 million units in October.
Existing home sales, which account for 90% of home sales in the United States, surged 3.8% year over year in November. Home sales in the South rose 8.3%, 8.4% in the Midwest and 6.7% in the Northeast. Chronic shortage of houses and robust demand for the same led to an elevation in prices primarily for first-time buyers, who constitute about 29% of the total number of buyers.
As per the Commerce department, housing starts for the month of November rose 3.3% to 1.3 million units, its highest level in a decade. Such an increase is indicative of the fact that the domestic housing market is bouncing back after being crippled by supply shortage.
Single-family home-building and permits also rose to a 10-year high in November. The figure increased 5.3% to 930,000 units to hit its highest level since September 2007. Such a high was achieved on the back of robust demand for housing due to near full-employment in the economy.
Home-Builders’ Confidence Hits 18-Year High
The index of home builder sentiment increased five points in December to 74 from the previous month. Any reading above 50 is considered positive. Moreover, this is the highest level recorded since 1999. The index logged in a reading of 69 a year ago in December.
Of the index's three components, current sales conditions surged four points to 81. Buyer traffic increased eight points to 58, coming in the positive territory for the second straight month. Further, sales prediction over the next six months rose three points to 79.
Such growth has primarily been achieved on the back of strong expectations from economic improvement. Interestingly, likely changes to the mortgage interest and property tax deductions under the GOP Tax Bill have weighed on homebuilders sentiment as it would remove the benefits a homeowner enjoys. However, business incentives in the tax plan actually overshadowed all other negatives and led to a surge in homebuilders’ confidence.
Top 5 Real Estate Funds To Buy Now
A slew of positive data points indicate that there are ample reasons to be optimistic about the broader housing sector. Moreover, the hurricane season is almost over while wages and economic growth continue to pick up. Therefore, adding some real estate funds to your portfolio would be prudent at this point.
The question that arises now is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without 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).
Here, we have highlighted five real estate mutual funds flaunting a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). Moreover, these funds have encouraging one-year and YTD returns. Additionally, the minimum initial investment is within $5000 and net assets are above $50 million.
Fidelity Advisor International Real Estate Fund Class I (FIRIX - Free Report) seeks to invest primarily in foreign securities. The fund invests a bulk of its assets in securities of companies involved in the real estate industry as well as real estate-related investments. It allocates investments across the globe in different countries and regions.
FIRIX has an annual expense ratio of 0.95%, which is below the category average of 1.34%. The fund has one-year and YTD returns of 27.1% and 25.1%, respectively. It holds a Zacks Mutual Fund Rank #1.
TIAA-CREF Real Estate Securities Retirement (TRRSX - Free Report) seeks maximum total returns over the long run through growth of capital and current income. TRRSX invests a large chunk of its assets in companies primarily involved in operations related to the real estate domain. The fund may invest a maximum of 15% of its assets in securities issued by foreign entities.
TRRSX has an annual expense ratio of 0.75%, which is below the category average of 1.22%. The fund has one-year and YTD returns of 14.8% and 13.5%, respectively. It holds a Zacks Mutual Fund Rank #1.
Fidelity Real Estate Investment Portfolio Fund (FRESX - Free Report) seeks above-average income and long-term capital growth consistent with reasonable investment risk. FRESX seeks to provide a yield that exceeds the composite yield of the Standard and Poor's 500 Index. FRESX normally invests at least 80% of the fund's total assets in equity securities of companies principally engaged in the real estate industry and other real estate-related investments.
FRESX has an annual expense ratio of 0.76%, which is below the category average of 1.22%. The fund has one-year and YTD returns of 4.5% and 3.7%, respectively. It holds a Zacks Mutual Fund Rank #2.
Principal Real Estate Securities R5 (PREPX - Free Report) seeks growth of total returns. PREPX invests the lion’s share of its assets in equity securities of real estate companies. The fund focuses on value equity securities.
PREPX has an annual expense ratio of 1.08%, which is below the category average of 1.22%. The fund has one-year and YTD returns of 12% and 10.3%, respectively. It holds a Zacks Mutual Fund Rank #2.
John Hancock II Real Estate Securities 1 (JIREX - Free Report) seeks appreciation of capital and income over the long term. JIREX invests primarily in equity securities of companies engaged in operations related to the real estate sector, which also include REITs. The fund invests in securities including common stock, preferred stock and convertible securities. It may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory.
JIREX has an annual expense ratio of 0.79%, which is below the category average of 1.22%. The fund has one-year and YTD returns of 9.5% and 7.7%, respectively. It holds a Zacks Mutual Fund Rank #1.
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 >>