3 Real Estate Stocks to Grab Now on Slowing Mortgage Rates

Industry Overview - The real estate sector has shown a positive performance in 2024, with the S&P 500 Real Estate Select Sector SPDR (XLRE) increasing by 11.1% year to date as of September 4 [1] - The sector experienced a decline until the end of June, but optimism regarding potential Federal Reserve rate cuts and decreasing mortgage rates has contributed to a market turnaround [1] Mortgage Rate Trends - The benchmark 30-year average mortgage rate decreased to 6.5% recently, marking the lowest level since May 2023, with further reductions noted on August 30 to 6.37% [2] - The National Association of Realtors (NAR) has revised its forecast for the 30-year fixed mortgage rate to an average of 6.9% for the year, up from a previous estimate of 6.7%, and anticipates rates of 6.5-6.7% in the fourth quarter [2] - NAR expects the second half of 2024 to see moderately lower mortgage rates, increased home sales, and price stability [2] Market Sentiment - Elevated mortgage rates have negatively impacted affordability and home sales, while also affecting homeowners with adjustable-rate mortgages due to increased monthly payments [3] - The NAHB/Wells Fargo Housing Market Index (HMI) indicates subdued overall confidence in the housing market, with a slight decline from 43 in June to 42 in July [3] Future Outlook - Anticipated rate cuts starting in September, along with decreasing mortgage rates, may improve conditions for home buyers [4] - An increase in housing inventory could lead to lower prices, potentially attracting first-time buyers even in the event of a recession [4] Investment Opportunities - Three real estate stocks have been identified with strong potential based on positive earnings estimate revisions over the past 60 days, all holding Zacks Rank 1 (Strong Buy) or 2 (Buy) [5] - Two Harbors Investment Corp. (TWO) is a real estate investment trust (REIT) with an expected earnings growth rate of 757.1% for the current year and a Zacks Rank 1 [6] - Tanger Inc. (SKT), a REIT focused on shopping centers, has an expected earnings growth rate of 6.6% and holds a Zacks Rank 2 [6] - Dynex Capital, Inc. (DX), a mortgage REIT, has an expected earnings growth rate of 205.3% and also holds a Zacks Rank 2 [7]