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3 Real Estate Mutual Funds to Grab as the Sector Rebounds
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The markets closed 2023 on a high note, with investors widely anticipating Fed interest rate cuts as early as March 2024. While that has not transpired, today, we have the easing of monetary policy in sight. The gloom and doom that had surrounded the real estate sector on Wall Street a couple of years ago seems to be behind us.
According to the U.S. Census Bureau’s report, in July 2024, there was a 0.3% decrease in U.S. construction spending. The data revealed that construction spending reached $2,162.7 billion after making adjustments to the revised June estimate of $2,169 billion. However, during the first seven months of this year, construction spending amounted to $1,237.5 billion, 8.8% above $1,137.4 billion for the same period in 2023. This robust growth in the sector indicates that the real estate sector is back on the recovery path after the plunge in 2022. The Real Estate Select Sector SPDR (XLRE) has gained 10.8% in 2024 year to date.
Also, it is currently a widely accepted notion that the Fed would announce at least a 25 basis point rate cut in its September meeting. Buoyed by the signals made by the Fed, the benchmark 30-year average mortgage rate fell to 6.5% late last week, its lowest level since May 2023. The 30-year fixed-rate mortgage fell further on Aug. 30 to 6.37%. The National Association of Realtors (“NAR”) expects the 30-year fixed mortgage rate to average 6.9% in its recent quarterly forecast published in June. This is an upward revision from its previous forecast of 6.7%. NAR has also revised its forecast upward for the fourth quarter to 6.5-6.7%. It expects the second half of 2024 to witness moderately lower mortgage rates, higher home sales and price stability.
Real estate mutual funds provide much-required stability and growth potential. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Our Picks
We have selected three real estate mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive 5-year and 10-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio.
T. Rowe Price Real Estate (TRREX - Free Report) invests primarily in equity securities of real estate companies. It usually maintains a significant portion of assets in real estate investment trusts.
Gregg Korondi has been the lead manager of TRREX since Jan. 1, 2024. Three top holdings for TRREX are 8.3% in Prologis, 7.8% in American Tower and 7.3% in Equinix.
TRREX’s 5-year and 10-year annualized returns are 3.4% and 5%, respectively. The fund has a net expense ratio of 0.87% compared with the category average of 0.98%. TRREX 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.
Fidelity Series Real Estate Income (FSREX - Free Report) invests primarily in preferred and common stocks of real estate investment trusts, debt securities of real estate entities and commercial and other mortgage-backed securities, with a focus on lower-quality debt securities.
Bill Maclay has been the lead manager of FSREX since Mar. 30, 2019. Three top holdings for FSREX are 2.1% in AGNC Investment, 1.7% in Annaly Capital and 1.7% in DigitalBridge.
FSREX’s 5-year and 10-year annualized returns are 4.3% and 5.4%, respectively. The fund has a net expense ratio of 0.01%. FRESX has a Zacks Mutual Fund Rank #1.
VY CBRE Global Real Estate (IRGIX - 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 actual real estate.
Joseph P. Smith has been the lead manager of IRGIX since Feb. 27, 2007. Three top holdings for IRGIX are 6.5% in Equinix, 6.3% in Simon Property Group and 5.5% in Welltower.
IRGIX’s 5-year and 10-year annualized returns are 3.3% and 3.5%, respectively. The fund has a net expense ratio of 0.87%. IRGIX has a Zacks Mutual Fund Rank #1.
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3 Real Estate Mutual Funds to Grab as the Sector Rebounds
The markets closed 2023 on a high note, with investors widely anticipating Fed interest rate cuts as early as March 2024. While that has not transpired, today, we have the easing of monetary policy in sight. The gloom and doom that had surrounded the real estate sector on Wall Street a couple of years ago seems to be behind us.
According to the U.S. Census Bureau’s report, in July 2024, there was a 0.3% decrease in U.S. construction spending. The data revealed that construction spending reached $2,162.7 billion after making adjustments to the revised June estimate of $2,169 billion. However, during the first seven months of this year, construction spending amounted to $1,237.5 billion, 8.8% above $1,137.4 billion for the same period in 2023. This robust growth in the sector indicates that the real estate sector is back on the recovery path after the plunge in 2022. The Real Estate Select Sector SPDR (XLRE) has gained 10.8% in 2024 year to date.
Also, it is currently a widely accepted notion that the Fed would announce at least a 25 basis point rate cut in its September meeting. Buoyed by the signals made by the Fed, the benchmark 30-year average mortgage rate fell to 6.5% late last week, its lowest level since May 2023. The 30-year fixed-rate mortgage fell further on Aug. 30 to 6.37%. The National Association of Realtors (“NAR”) expects the 30-year fixed mortgage rate to average 6.9% in its recent quarterly forecast published in June. This is an upward revision from its previous forecast of 6.7%. NAR has also revised its forecast upward for the fourth quarter to 6.5-6.7%. It expects the second half of 2024 to witness moderately lower mortgage rates, higher home sales and price stability.
Real estate mutual funds provide much-required stability and growth potential. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Our Picks
We have selected three real estate mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive 5-year and 10-year annualized returns and minimum initial investments within $5000, and carry a low expense ratio.
T. Rowe Price Real Estate (TRREX - Free Report) invests primarily in equity securities of real estate companies. It usually maintains a significant portion of assets in real estate investment trusts.
Gregg Korondi has been the lead manager of TRREX since Jan. 1, 2024. Three top holdings for TRREX are 8.3% in Prologis, 7.8% in American Tower and 7.3% in Equinix.
TRREX’s 5-year and 10-year annualized returns are 3.4% and 5%, respectively. The fund has a net expense ratio of 0.87% compared with the category average of 0.98%. TRREX 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.
Fidelity Series Real Estate Income (FSREX - Free Report) invests primarily in preferred and common stocks of real estate investment trusts, debt securities of real estate entities and commercial and other mortgage-backed securities, with a focus on lower-quality debt securities.
Bill Maclay has been the lead manager of FSREX since Mar. 30, 2019. Three top holdings for FSREX are 2.1% in AGNC Investment, 1.7% in Annaly Capital and 1.7% in DigitalBridge.
FSREX’s 5-year and 10-year annualized returns are 4.3% and 5.4%, respectively. The fund has a net expense ratio of 0.01%. FRESX has a Zacks Mutual Fund Rank #1.
VY CBRE Global Real Estate (IRGIX - 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 actual real estate.
Joseph P. Smith has been the lead manager of IRGIX since Feb. 27, 2007. Three top holdings for IRGIX are 6.5% in Equinix, 6.3% in Simon Property Group and 5.5% in Welltower.
IRGIX’s 5-year and 10-year annualized returns are 3.3% and 3.5%, respectively. The fund has a net expense ratio of 0.87%. IRGIX has 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 >>