The American housing market is growing at a decent pace courtesy of several factors such as record low mortgage rates and a solid domestic economy. As more prospective homebuyers join the club to look at potential new homes, let us take a look at a couple of mutual funds from the real estate and home building sector which could benefit ahead.

Monthly New Residential Sales Up

Sales of new single-family houses in July were more than expected, per a joint statement by the U.S. Census Bureau, and the U.S. Department of Housing and Urban Development. A total of 635,000 homes were sold in July, higher than the estimated 609,000.

Mortgage Rates Still Low

Among the factors pushing the sale of new homes, low mortgage rates and increasing income are prominent. Lower rates are undoubtedly making it easier for homebuyers to afford a home. In addition, millennial homebuyers are entering the housing market as well, driving demand for new homes.

According to a recent survey by real estate data and analytics firm CoreLogic along with RTi Research of Norwalk, CT, 26% millennials plan to buy a home within the next one year and 29% aim to rent compared to only 8% millennials who expect to sell a home.

Although home prices increased 3.6% on an annualized basis in July, low mortgage rates make new home investment appear lucrative.

Decent Job Market Pushes Homebuyers

Per the latest report by the Labor department, an impressive total of 130,000 jobs were added in August. This is indicative of an expanding U.S. economy despite rising trade tensions and fears of a global slowdown.

The job scenario has been especially good, thanks to the unchanged unemployment rate of 3.7% and decent wage growth. Average hourly earnings rose 0.4% in August and 3.2% on an annualized basis. Labor force participation increased as well.

In fact, a solid job market makes it easier for homebuyers to consider buying a home.

Our Choices

We have, therefore, selected four mutual funds that invest in real estate and home building companies. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.

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.

DWS RREEF Real Estate Securities Fund - Class A (RRRAX - Free Report) aims for capital growth over a long period of time along with current income. The non-diversified fund invests the majority of its assets in securities of real estate companies and real estate investment trusts etc.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years.

RRRAX carries a Zacks Mutual Fund Rank #1. The fund has an annual expense ratio of 0.97%, which is below the category average of 1.21%. The fund has returned 27.1% on a year-to-date basis. RRRAX has a minimum initial investment of $1000.

Davis Real Estate Fund Class A (RPFRX - Free Report) aims for a total return via a combination of income and capital growth. The fund invests the majority of its assets in companies engaged in activities in the real estate industry. The fund mostly invests in common stocks of U.S. and non-U.S. companies.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years.

RPFRX carries a Zacks Mutual Fund Rank #1. The fund has an annual expense ratio of 0.97%, which is below the category average of 1.21%. The fund has returned 23.3% on a year-to-date basis. RPFRX has a minimum initial investment of $1000.

Fidelity Real Estate Investment Portfolio (FRESX - Free Report) aims to generate above-average income and capital growth over a long period. The fund invests the majority of its assets in securities of companies engaged in the real estate industry. The fund mostly invests in common stocks.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years.

FRESX carries a Zacks Mutual Fund Rank #1. The fund has an annual expense ratio of 0.76%, which is below the category average of 1.21%. The fund has returned 23.5% on a year-to-date basis. FRESX has no minimum initial investment.

Cohen & Steers Real Estate Securities Fund, Inc. Class Z (CSZIX - Free Report) aims for total return by investing in securities of real estate companies. The fund invests the majority of its assets in income-producing common stocks and other similar equity securities. CSZIX is a non-diversified fund.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years.

CSZIX carries a Zacks Mutual Fund Rank #2. The fund has an annual expense ratio of 0.79%, which is below the category average of 1.21%. The fund has returned 28.7% on a year-to-date basis. CSZIX has no minimum initial investment.