M
ortgage rates have surged in recent weeks, defying expectations that they would continue to decline following the Federal Reserve's rate cuts. The average 30-year fixed mortgage rate has risen to its highest level since August, reaching 6.52%, according to a Mortgage Bankers Association survey. This marks the third consecutive week of increases.

    The rise in mortgage rates is linked to the upward movement of Treasury yields, particularly the 10-year Treasury, which is seen as the biggest influence on mortgage rates. Despite the Fed's rate cuts, long-term bond yields have been guided by expectations of multiple rounds of cuts to the short-term Fed funds rate.

    The National Association of Realtors (NAR) has revised its forecast upward for the 30-year fixed mortgage rate, expecting it to average 6.9% in its recent quarterly forecast published in June. NAR also predicts moderately lower mortgage rates and higher home sales in the second half of 2024.

    Despite elevated mortgage rates, real estate has had a decent year, with the S&P 500 Real Estate Select Sector SPDR advancing 13.6% year-to-date as of October 17. With rates potentially coming down, there may be better times ahead for home buyers.

    We have identified three promising stocks in the real estate sector that have seen positive earnings estimate revisions in the past 60 days. Our picks include Sino Land Company Limited (SNLAY), Two Harbors Investment Corp. (TWO), and Granite Point Mortgage Trust Inc. (GPMT). These stocks carry a Zacks Rank of #1 or #2, indicating strong potential for growth.