#7 - Two Harbors Investment Corp. (NYSE:TWO)
Another real estate investment trust to consider is Two Harbors Investment Corp. (NYSE: TWO). The company invests in mortgage servicing rights, residential mortgage-backed securities, and other financial assets. At a time when U.S. foreclosures remain above levels reached during the pandemic, a company that focuses on RMBS may seem like a risky bet. However, the principal and interest on these securities are backed by Freddie Mae, Freddie Mac, or other government agencies.
Many investors buy REITS for predictable, growing dividends. That may leave you wanting with Two Harbors. Mortgage REITs tend to be total return investments, meaning you reinvest dividends, which have the tendency to get cut. That’s been the case with TWO stock.
With that in mind, an investment in Two Harbors should be based on the belief that earnings will grow as interest rates fall. If that happens, analysts may start to raise their price targets for TWO stock.
About Two Harbors Investment
Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions.
Read More - Current Price
- $11.67
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $14.32 (22.7% Upside)
Now that you have a few housing stocks to consider buying, the question comes down to how much you believe that sellers will be willing to put up the “For Sale" sign. Like many things related to the market, there are two sides to consider.
The bullish case for housing stocks centers on the idea that this dip in mortgage rates will spur buying activity, particularly for buyers who have been sitting on the sidelines waiting for any relief in mortgage rates.
But for every bull case, there's a bear case. In mid-August, investors will get the next read on inflation when the July readings of the Producer Price Index (PPI) and Consumer Price Index (CPI) are released. If those prints show inflation starting to run hotter, you could see expectations for a rate cut decline, and that could dampen home-buying enthusiasm.
That said, the housing market has been remarkably resilient, even as many Americans realize the days of 3% or lower mortgages are over.
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