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3 Mutual Funds to Buy on Phenomenal Housing Data

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Per the latest joint report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, housing starts and building permits for March came in at 1.32 million and 1.35 million units, respectively. While housing starts increased 1.9% in March, building permits advanced about 2.5% in the same period.

The metrics followed 7% and 5.7% respective declines in February. Such a surge has primarily been attributed to a rebound in multifamily house constructions. Under such favorable circumstances, investing in real estate mutual funds would make for a prudent investment decision.

Rebound in Multifamily House Construction Boosts Starts and Permits

Multifamily home building has surged 16.1% in the last month. This follows a decline of 28% in February. Further, multifamily permits rose 22.9% in March. Such a spike has been pivotal in driving housing starts and building permits higher last month.

Per the recent study conducted by FreddieMac, multifamily performance was mostly strong through 2017. The study also stated that the trend which began last year is likely to continue through 2018 as completions peak and supply increases slightly faster than demand. Vacancy rates are expected to continue to scale higher at the national level and in most metropolitan areas, but, the majority will remain below historical averages. Rents will continue to grow on healthy labor market and lifestyle preferences, creating demand for multifamily units.

On the contrary, single-family units which accounts for the largest portion of the housing market, declined 3.7% in March due to a shortage in housing lots amid high availability of construction materials. However, the impacts of such a decline were rather offset by a steady increase in multifamily home building.

3 Great Choices

Given such circumstances, we have highlighted three real estate mutual funds that are poised to gain significantly from a rebound in housing starts and building permits. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

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 Advisor International Real Estate Fund Class I FIRIX 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.

This Sector - Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 6.4% and 7.1%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here .

FIRIX has a Zacks Rank #1 and an annual expense ratio of 0.95%, which is below the category average of 1.33%.

Principal Real Estate Securities R5 PREPX 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.

This Sector - Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 2.6% and 7.8%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here .

PREPX has a Zacks Rank #1 and an annual expense ratio of 1.07%, which is below the category average of 1.23%.

John Hancock II Real Estate Securities 1 JIREX 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 includes 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.

This Sector - Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 1.7% and 6.3%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here .

JIREX has a Zacks Rank #2 and an annual expense ratio of 0.79%, which is below the category average of 1.22%.

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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.


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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