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3 Real Estate Stocks to Buy on Fed's Interest Rate Hold

The real estate sector is not having a great 2023. Since the year started, the Real Estate Select Sector SPDR (XLRE) has declined 5.4%. Higher mortgage rates have continued to sideline buyers. The same has also discouraged homeowners with cheaper loans from selling, which in turn has pushed up costs for whatever is available in the market.

The single biggest factor weighing in on the real estate sector, however, has been the uncertainty with respect to the Fed’s interest rate regime. Earlier this week, data from the Case-Shiller home prices index showed that across the United States, home prices peaked in August, capping seven straight months of gains.

However, with the Fed deciding to hold the benchmark interest rate steady on Wednesday, the sector got a big boost. Mortgage rates in the United States fell for the first time in eight weeks, albeit remaining close to a two-decade high. On Thursday, at one point during the session, homebuilders were up as much as 5.2% before paring off. REITs gained for a fourth consecutive session, having ended October at their lowest level since March 2020.

Currently, there is a heightened sentiment in the market that the Fed might be nearing the end of its rate-hike cycle. In such an eventuality, mortgage rates would be climbing down further, and it might be a classic buy-the-dip scenario for the real estate sector. Thus, investors might consider venturing into the sector.

Our Picks

We have narrowed our search to three real estate or related stocks that have good potential. These stocks have seen positive earnings estimate revisions in the past 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PennyMac Mortgage Investment Trust PMT is a specialty finance company investing primarily in residential mortgage loans and mortgage-related assets in the United States.

PMT has an expected earnings growth rate of 220.6% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 24.6% over the past 60 days. PMT currently holds a Zacks Rank #2.

Tanger Factory Outlet Centers, Inc. SKT is a real estate investment trust primarily investing in shopping centers.

SKT has an expected earnings growth rate of 4.4% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 1.6% over the past 60 days. SKT currently holds a Zacks Rank #2.

AvalonBay Communities, Inc. AVB is a publicly traded real estate investment trust that primarily invests in residential apartments.

AVB has an expected earnings growth rate of 8.2% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 0.3% over the past 60 days. AVB currently holds a Zacks Rank #2.

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AvalonBay Communities, Inc. (AVB) : Free Stock Analysis Report

Tanger Factory Outlet Centers, Inc. (SKT) : Free Stock Analysis Report

PennyMac Mortgage Investment Trust (PMT) : Free Stock Analysis Report

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Zacks Investment Research