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A sharp decline in inflation over the past year is finally giving more confidence to people as price pressures have eased a lot. This has seen a steady rise in construction activity as investments have been growing over the past few months.
The Commerce Department reported a 0.4% month-over-month rise in spending on construction activity in November. Although it came in lower than expectations, construction spending has lately been growing steadily. November’s jump marks the 11th straight month of growth in construction activity.
Year over year, construction spending surged 11.3% in November. Also, data for October was revised up to 1.2% from the earlier reported rise of 0.6%.
The steady rise indicates the underlying strength of the economy. The home building industry is also rebounding as the 30-year fixed mortgage rates fell further to below 7%. Homebuilding accounted for a bulk of the overall construction spending during and after the pandemic.
The trend is back as construction activity is getting a boost from the existing high demand for new single-family homes, which is being spurred by a substantial shortage of available pre-owned homes in the market.
Spending on residential projects increased 1.1% month over month in November. Outlays on new single-family homes rose 2.9%.
The Federal Reserve, which increased interest rates by 525 basis points to fight multi-year high inflation, is also about to end its monetary tightening campaign as inflation has declined sharply over the past year.
Hopes are now high that the Fed will go for at least three rate cuts this year, which is expected to act as a tailwind for the homebuilding sector.
3 Best Choices
As a result, we’ve chosen three funds from the real estate sector that are worth buying. These funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the 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).
DWS RREEF Real Estate Securities Fund– Class A RRRAX seeks long-term capital appreciation and current income. RRRAX invests the majority of its net assets in equity securities of real estate investment trusts and real estate companies.