3 Real Estate Stocks to Buy as Mortgage Rates Continue to Rise – December 30, 2024

Mortgage rates have resumed their climb after declining a bit since the announcement of rate cuts. As of Dec. 29, the 30-year fixed mortgage rate is 6.99%, increasing slightly from last week. The Fed’s decision to lower interest rates has not translated into immediate reductions in mortgage rates. In fact, mortgage rates in the United States have started to shift upward again.

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This upward trend in rates can be linked to long-term bond yields and renewed investor interest. Specifically, the 10-year Treasury is seen as the biggest influence on mortgage rates, and yields for the 10-year have increased in recent weeks. The benchmark yield rose again on Friday, hovering near a seven-month high. It rose 4 basis points higher to 4.626%.

This northward movement of mortgage rates defies conventional wisdom, as bond yields typically decrease as the Fed-determined federal funds rate does.  However, lower mortgage rates were prevalent even before the Fed started cutting rates. This is because long-term bond yields are also guided by the anticipation of multiple rounds of cuts to the short-term Fed funds rate, a possible six to eight cuts from September to deep into 2025. Now that the Fed’s December meet has indicated only a couple of cuts in 2025, all eyes will be on the mortgage rates’ reaction to it.

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While elevated mortgage rates in recent weeks seem have reduced affordability, with rates coming down, there might be better times ahead for home buyers. A higher inventory of homes would bring prices further down, luring first-time buyers. One must, thus, start considering parking part of their investments in promising stocks in 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. Our picks carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CBRE Group, Inc. (CBRE Quick QuoteCBRE – Free Report) is a real estate services and investment company.

CBRE has an expected earnings growth rate of 30% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 2.5% over the past 60 days. CBRE currently holds a Zacks Rank #2.

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ARMOUR Residential REIT, Inc. (ARR Quick QuoteARR – Free Report) engages in the business of investing in residential mortgage-backed securities.

ARR has an expected earnings growth rate of 5.3% for the next year. The Zacks Consensus Estimate for its current-year earnings has improved 1.3% over the past 60 days. ARR currently carries a Zacks Rank #2.

TPG RE Finance Trust, Inc. (TRTX Quick QuoteTRTX – Free Report) is a real estate finance company.

TRTX has an expected earnings growth rate of 133.5% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 1.8% over the past 60 days. TRTX currently sports a Zacks Rank #1.