4 Spectacular Funds From a Booming U.S. Housing Market


While the U.S. economy continues to bear the brunt of the coronavirus pandemic, the U.S. housing sector has emerged as one of the bright spots, giving investors an opportunity to make the most. A series of recent data from the housing market has underscored that this sector has shown consistent growth despite the health scare.

Per the Commerce Department’s recent report, new home sales increased by 4.8% to a seasonally adjusted annual rate of 1.011 million in August. The figures surpass July’s revised new home sales of 965,000 and the consensus estimate of 890,000. New home sales have increased 43.2% in the past month compared to a year ago. In fact, August’s new home sales now put the economic parameter to the highest level since September 2006.

The housing industry has witnessed a solid V-shaped recovery since May and is on track to surpass its pre-pandemic levels. Record low mortgage rates and remote working initiatives have further boosted the growth in this industry. In August, existing home sales edged up 10.2% compared to a year ago, and marking its highest level since 2006.

Increase in sales has also boosted homebuilders’ sentiment in September and the National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index rose to 83, marking the highest reading since its inception 35 years ago. And why not? The pandemic-led work-from-home practices have allowed people to reside in the suburbs, in turn, pushing up demand for home in those regions.

Additionally, a record low mortgage rate has also influenced homebuyers to opt for housing loans. Per the latest Freddie Mac report, the 30-year fixed-rate mortgage averaged 2.9% for the week ending Sep 24. Lower mortgage rates also led to encouraging mortgage applications. For the week ended Sep 18, new applications jumped 6.8% from the week earlier. Earlier this month, mortgage rates had hit the ninth all-time record low in 2020 in the week ending Sep 10.

Our Top 4 Fund Choices

The housing industry has held itself steady amid the pandemic slump, despite headwinds like delay in delivery of building materials and shortage of inventory. These favorable data encourages and instills confidence among investors. Hence, we have shortlisted four mutual funds from this space carrying a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform their peers in the future.

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).

Fidelity Real Estate Income Fund FRIFX aims for higher-than-average income, while capital growth stands as a secondary objective. The fund invests the majority of its assets in preferred and common stocks of REITs; debt securities of real estate entities; and commercial and other mortgage-backed securities.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 2.5% and 5.3% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FRIFX has an annual expense ratio of 0.75%, which is below the category average of 1.20%.

MFS Global Real Estate Fund Class R6 MGLRX aims for total return. The fund invests the majority of its assets in equity securities of U.S. and foreign real estate-related investments and may also invest the fund’s assets in real estate-related investments of any size.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 6% and 8.1% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

MGLRX has an annual expense ratio of 0.90%, which is below the category average of 1.26%.

DWS RREEF Real Estate Securities Fund – Class S RRREX aims for long-term capital appreciation and current income. The majority of this non-diversified fund’s assets is invested in equity securities of real estate investment trusts and real estate companies.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 4.1% and 5.5% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

RRREX has an annual expense ratio of 0.76%, which is below the category average of 1.20%.

TIAA-CREF Real Estate Securities Fund Retirement Class TRRSX aims for long-term total return through both capital appreciation and current income. The fund invests the majority of its assets in the securities of companies that are principally engaged in or related to the real estate industry, including those that own significant real estate assets.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 7.1% and nearly 9% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

TRRSX has an annual expense ratio of 0.76%, which is below the category average of 1.20%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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