4 Real Estate Fund to Buy as US Housing Starts Surge in July

Zacks Equity Research
Updated ·5 min read

Homebuilding activity in America accelerated the most in nearly four years, surging 22.6% in July and recording the biggest gain since October 2016. On Aug 18, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development’s jointly reported that housing starts came in at a pace of 1,496,000 units in July. The figure is much above June’s revised figure of 1,220,000 and beats the consensus estimate of 1,241,000 units.

The figure indicates the largest increase in homebuilding, especially with the Northeast region recording a 35.3% increase from June. Housing starts in the South jumped 33% from June and the Midwest and West registered around 6% increase each in July. The report also states that multi-family projects of five units or more surged nearly 57%, marking the largest increase since October 2016. However, construction of single-family increased just 8.2% in July.

July’s construction pace was the fastest since February this year, when coronavirus outbreak had halted the record-long expansion of the U.S. economy. In fact, July’s surge now puts housing starts just 4.5% below February’s pace of 1,567,000 units.

Building permits issuance also rose 18.8% in July to a seasonally adjusted annual rate of 1,495,000. The figure surpassed the consensus estimate of 1,333,000 and beat June’s revised figure of 1,258,000 units.

Earlier this week, a report by the National Association of Home Builders stated that confidence among home builders surged to 78 in August. The index’s August figure now marks its highest level matching the December 1998 record.

Our Top Real Estate Fund Picks

The U.S. housing sector is emerging as one of the bright spots of the economy. In fact, the solid housing data indicates that this sector has overcome the coronavirus slump and is poised to grow. Hence, we have highlighted four real estate mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) that are poised to gain from such factors.

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 Investment Portfolio FRESX fund aims for above-average income and long-term capital growth which is consistent with reasonable investment risk. This non-diversified fund invests primarily in common stocks. 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.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 1.3% over the past three years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FRESXhas an annual expense ratio of 0.74%, which is below the category average of 1.20%.

DWS RREEF Real Estate Securities Fund - Class A RRRAX aims for long-term capital appreciation and current income. The majority of this non-diversified fund’s assets are 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 2.4% over the past three years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

RRRAXhas an annual expense ratio of 0.98%, which is below the category average of 1.20%.

Fidelity Advisor Real Estate Income Fund Class A FRINX aims for higher-than-average income. As a secondary objective, the fund seeks capital growth. FRINX invests the majority of its assets in common stocks of REITs as well as securities of companies principally engaged in the real estate industry and other real estate related investments.

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

FRINXhas an annual expense ratio of 1.01%, which is below the category average of 1.20%.

MFS Global Real Estate Fund Class A MGLAX aims for total return by investing a minimum the lion’s share of its assets in domestic and foreign real estate-related investments. MGLAX invests primarily in equity securities.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 3.9% over the past three years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

MGLAXhas an annual expense ratio of 1.23%, which is below the category average of 1.26%.

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Click to get this free report Get Your Free (FRESX): Fund Analysis Report Get Your Free (MGLAX): Fund Analysis Report Get Your Free (FRINX): Fund Analysis Report Get Your Free (RRRAX): Fund Analysis Report To read this article on Zacks.com click here. Zacks Investment Research