In this article, we will discuss the 10 most undervalued real estate stocks to buy according to analysts.
Where is the US Real Estate Market Heading?
According to the National Association of Home Builders, $204 billion worth of goods were utilized in the construction of new single-family and multifamily housing in the US in 2024, out of which $14 billion were imported from outside the country. Softwood lumber and gypsum are two essentials used in new home construction and are majorly imported from Canada and Mexico. The new President has warned that he might place reciprocal tariffs on Canadian dairy and lumber that might be implemented soon. Earlier, tariffs on Canada and Mexico went into effect on March 4. Later, President Trump paused tariffs on products from Mexico and Canada covered by the USMCA free trade agreement until April 2.
Simultaneously, it is worth noting that the average rate on a 30-year mortgage has been declining since mid-January. While the average rate is at its lowest level since December 12, it is still higher relative to January 2021’s 2.65% record low. Joel Berner, senior economist at Realtor.com, stated the situation as follows:
“We do not anticipate significant relief from high mortgage rates in the near future because of inflation remaining stubbornly high, which will not be helped by the tariffs that the Trump administration appears committed to rolling out”
On the bright side, mortgage applications witnessed a weekly rise thereby indicating that the mortgage rates have fallen enough to bring some potential home buyers and current homeowners back into the market. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume climbed 20.4% for the week ending February 28 compared with the prior week.
With that being said, let’s move to the 10 most undervalued real estate stocks to buy according to analysts.
Aerial view of a real estate complex with several residential lots under construction.
Our Methodology
In order to compile a list of the 10 most undervalued real estate stocks to buy according to analysts, we first used a stock screener to screen real estate stocks that have a forward P/E lower than 15. Moving on, we shortlisted the 10 stocks with the highest average upside potential, as of March 6. The 10 most undervalued real estate stocks to buy according to analysts have been arranged in ascending order of their average upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Most Undervalued Real Estate Stocks To Buy According To Analysts
10. Rithm Capital Corp. (NYSE:RITM)
Average Upside Potential: 10.64%
Forward P/E: 5.95
Number of Hedge Fund Holders: 33
Rithm Capital Corp. (NYSE:RITM) is an asset manager focused on real estate and financial services. The firm invests across a variety of real estate and financial services assets some of which include residential mortgage loans, consumer loans, residential transitional loans, and commercial real estate. Rithm has a family of operating companies including Newrez, Genesis Capital, and Sculptor.
Rithm Capital Corp. (NYSE:RITM) has grown from a manager of just mortgage servicing rights to an investment platform with an opportunistic portfolio across the real estate and financial services sectors. The firm has a distinct competitive advantage in the form of vertically integrated operating companies with capabilities in direct asset sourcing, asset optimization, and capital markets. This diversified portfolio of investments and operating companies has offered the company resilience against changing economic conditions.
Rithm Capital Corp. (NYSE:RITM) is a high-performing diversified asset manager that has delivered 76% earnings growth since Q1’21. The firm closed 2024 with robust earnings and a strong performance in each of its core businesses. The firm recorded earnings available for distribution per diluted common share of $2.10 in fiscal year 2024, demonstrating a 27% year-over-year growth. Overall, the diversified portfolio, robust asset-generating franchises, and strong earnings deem Rithm Capital Corp. (NYSE:RITM) a potential investment opportunity.
9. Franklin BSP Realty Trust, Inc. (NYSE:FBRT)
Average Upside Potential: 13.66%
Forward P/E: 9.44
Number of Hedge Fund Holders: 9
Franklin BSP Realty Trust, Inc. (NYSE:FBRT) originates, acquires, and manages a diversified portfolio of commercial real estate debt primarily first mortgage loans. The REIT’s portfolio of debt investments is generally secured by real estate located within and outside the US. Additionally, the firm invests in subordinate loans, mezzanine loans, and securities. As of December 31, 2024, FBRT had approximately $6 billion of assets.
Franklin BSP Realty Trust, Inc. (NYSE:FBRT) maintains a diversified portfolio that is capable of generating attractive risk-adjusted returns and a stable income. One of the strengths of the real estate investment trust is that the process is handled internally including the origination, underwriting, and asset management. In addition to extensive origination, underwriting, and asset management capabilities, the REIT boasts a strong network of broker and borrower relationships which leads to proprietary deal flow and an extensive pipeline of investment opportunities.
On March 10, the company announced the planned acquisition of a privately held commercial real estate finance company, NewPoint Holdings JV LLC. While the acquisition has been planned for the third quarter of 2025, it marks a transformative transaction for the firm as the combined operations offer an opportunity for earnings growth as well as broaden the firm’s multifamily operations to include agency and mortgage servicing alongside its existing commercial real estate lending products.
8. Ladder Capital Corp (NYSE:LADR)
Average Upside Potential: 16.03%
Forward P/E: 10.78
Number of Hedge Fund Holders: 21
Ladder Capital Corp (NYSE:LADR) is an internally managed commercial real estate investment trust. The firm originates and invests in a diverse portfolio of commercial real estate and real estate-related assets. Ladder Capital Corp was founded in 2008 and is headquartered in New York City.
Ladder Capital Corp (NYSE:LADR) serves as one of the nation’s leading commercial real estate capital providers. The REIT has a diversified CRE investment portfolio with $4.9 billion of investment assets and unrestricted cash, including CRE loans, equities, and securities. The origination, underwriting, asset management, and transaction management functions take place in-house while the executive team’s average experience is a solid 29 years.
A comparison of key metrics for the firm from one year ago indicates that it is witnessing robust loan payoffs, a substantial and growing level of liquidity, materially lower leverage than peers, and a stable book value. A conservative investment basis and credit underwriting expertise have driven book value stability for the company, with a significant outperformance versus the peer group.
7. TPG RE Finance Trust, Inc. (NYSE:TRTX)
Average Upside Potential: 18.13%
Forward P/E: 8.52
Number of Hedge Fund Holders: 23
TPG RE Finance Trust, Inc. (NYSE:TRTX) originates first-mortgage loans greater than $50 million in primary and select secondary markets across the US. The REIT creates highly structured financing solutions for property owners with transitional capital needs across a variety of real estate asset types. As of December 31, 2024, the firm managed a $3.4 billion portfolio of assets in primary and secondary US markets.
The REIT is externally managed by TPG RE Finance Trust Management, L.P., a part of TPG Real Estate which is the real estate investment platform of global alternative asset management firm TPG. TRTX advantages from the network and market insight of TPG’s Real Estate equity investing team which invests in real estate-intensive operating companies and large portfolios of commercial properties across the US and Europe. Additionally, the REIT has decades of lending experience which enables long-standing relationships with operators, brokers, and equity providers.
While TPG RE Finance Trust, Inc. (NYSE:TRTX) sees an attractive real estate credit landscape for itself in the current year, the firm originated $562 million of loan investments in 2024. Meanwhile, it originated $242 million of new loan investments while receiving $110 million of loan repayments in the last quarter of the year.
6. Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI)
Average Upside Potential: 18.38%
Forward P/E: 8.12
Number of Hedge Fund Holders: 6
Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) is a commercial mortgage real estate investment trust that originates senior secured loans primarily to state-licensed cannabis operators in limited-license states in the United States.
Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) has a growing loan portfolio diversified across geographies, operators, and asset types with strong real estate collateral coverage and additional collateral. The company is chosen by operators on the basis of its strong brand reputation, strong ties to financial sponsors active in the cannabis space, deep industry knowledge, and execution on a timely basis. The market opportunity for the company remains promising considering that sales of the US cannabis industry are to rival beer, wine, and spirits by 2030.
The trends of state legalization of cannabis for medical and adult use, and increased consumer adoption will continue to drive the demand for financing in the cannabis market. Furthermore, the company faces limited competition in a highly fragmented market due to the federal prohibition on cannabis use and commercialization restricting commercial and financial activities.
5. KKR Real Estate Finance Trust Inc. (NYSE:KREF)
Average Upside Potential: 20.15%
Forward P/E: 12.93
Number of Hedge Fund Holders: 19
KKR Real Estate Finance Trust Inc. (NYSE:KREF) is a real estate finance company that focuses on originating senior loans secured by commercial real estate assets. The company is externally managed and advised by an affiliate of the leading global investment firm, KKR & Co. Inc.
Other than boasting a best-in-class portfolio, KKR Real Estate Finance Trust Inc. (NYSE:KREF) claims that its manager’s relationship with KKR and its differentiated global investment management platform offers it significant advantages in sourcing, evaluation, underwriting, and managing its investments. It is worth mentioning that KKR manages nearly $80 billion of real estate assets globally.
While KKR Real Estate Finance Trust Inc. (NYSE:KREF) received $1.5 billion in loan repayments in 2024, repayments are expected to surpass $1 billion again this year and the management anticipates originations outpacing repayments in the near term. While the lending market is attractive and the company plans to be active as well, it anticipates a strong repayment and origination year, reiterating its optimism heading into 2025.
4. Redwood Trust, Inc. (NYSE:RWT)
Average Upside Potential: 23.64%
Forward P/E: 8.69
Number of Hedge Fund Holders: 12
Redwood Trust, Inc. (NYSE:RWT) is a leading specialty finance company that has been enabling access to housing opportunities for American homebuyers and renters since 1994. The company invests in mortgages for single-family and rental properties. Additionally, it acquires, sells, and securitizes residential loans and offers a steady source of liquidity to the owner-occupied and rental markets. The firm operates its business in three segments including Sequoia Mortgage Banking, CoreVest Mortgage Banking, and Redwood Investments.
Redwood Trust, Inc. (NYSE:RWT) has served as a leading provider of capital to parts of the residential housing market not well-served by government programs for 30 years. Amidst elevated mortgage rates and a limited housing supply, Redwood is witnessing a growth in demand from its loan sellers for non-traditional loan products. Looking into 2025, the management believes that the housing policy and regulation are going to change under the new admin but expects most of it to benefit the company. The firm is also positioning itself as a preferred partner to its bank loan sellers, with $3.8 billion FY’24 loans locked with banks.
Redwood Trust, Inc. (NYSE:RWT) favors from the strength of its operating businesses which are delivering increased efficiency. In the fourth quarter alone, Sequoia locked $2.3 billion of loans, up 4% quarter-over-quarter. Meanwhile, CoreVest funded $501 million of loans, a 9% rise from the preceding quarter. Simultaneously, Redwood Investments deployed $81 million of capital into accretive internally sourced and third-party investments.
3. Jones Lang LaSalle Incorporated (NYSE:JLL)
Average Upside Potential: 25.05%
Forward P/E: 14.91
Number of Hedge Fund Holders: 48
Jones Lang LaSalle Incorporated (NYSE:JLL) is a global commercial real estate and investment management company. The firm helps buy, manage, build, occupy, and invest in various types of commercial, industrial, hotel, residential and retail properties. JLL serves clients through five business segments including Markets Advisory, Capital Markets, Work Dynamics, LaSalle, and JLL Technologies.
Jones Lang LaSalle Incorporated (NYSE:JLL) has invested more than 200 years in building a premier global brand and platform. The best-in-class global platform combined with deep local market knowledge continues to set the firm apart. JLL continues investing in its business to differentiate in the market and achieve superior outcomes for clients. During its recent quarter, the firm announced the launch of JLL Falcon, its artificial intelligence platform which combines its comprehensive proprietary data with generative AI models to accelerate the digital transformation of the commercial real estate industry.
Other than having a global scale and diversification across asset classes, the Fortune 500 company has robust business segments. For the fourth quarter of 2024, revenue growth rates for Markets Advisory, Capital Markets, Work Dynamics, and LaSalle segments were 11%, 32%, 15%, and 42% respectively. The firm looks forward to profitable growth and increased market share in 2025 with its differentiated platform and strong momentum amidst an improving real estate cycle.
2. Newmark Group, Inc. (NASDAQ:NMRK)
Average Upside Potential: 37.98%
Forward P/E: 9.10
Number of Hedge Fund Holders: 27
Newmark Group, Inc. (NASDAQ:NMRK) serves as a commercial real estate advisor and service provider to global corporations, large institutional investors, and other occupiers and owners of commercial real estate. The firm was founded in 1929 and is headquartered in New York City. The firm’s expertise spans capital markets, leasing, valuation, corporate services, and commercial property management.
The leading commercial real estate services platform boasts a rapidly growing global footprint as well as relationships with many of the most significant commercial property owners, real estate developers, and investors globally. The growth story has been strong for Newmark since the firm has successfully raised its total revenues by more than 1,000% between 2011 and 2022 thereby becoming one of the fastest-growing commercial real estate firms in the industry.
The growth continues to accelerate for the world leader in commercial real estate as it remains positioned for strong revenue and earnings growth in 2025 and is targeting at least $630 million of adjusted EBITDA in 2026. Newmark Group, Inc. (NASDAQ:NMRK) witnessed a 41.7% increase in GAAP net income per fully diluted share and a 17.1% rise in adjusted EPS in the full year 2024 as compared to FY 2023.
1. Forestar Group Inc. (NYSE:FOR)
Average Upside Potential: 44.76%
Forward P/E: 6.22
Number of Hedge Fund Holders: 16
Forestar Group Inc. (NYSE:FOR) is one of the largest residential community developers in the United States which primarily acquires entitled real estate and develops it into finished residential lots for sale to homebuilders. Forestar is a majority-owned subsidiary of D.R. Horton.
Forestar’s strategic relationship with D.R. Horton, one of the largest American homebuilders, presents it with significant built-in demand for current and future lot deliveries. The firm is more geographically diversified than most homebuilders with operations in 62 markets across 24 states and 106,000 lots controlled as of December 31, 2024. During the 12-month period ended December 31, Forestar successfully delivered over 14,200 residential lots.
As a highly differentiated, pure-play, residential lot developer for the affordably priced single-family home market, Forestar is uniquely positioned to benefit from the shortage of finished lots in the homebuilding industry. The firm plans to invest $2 billion in land acquisition and development in fiscal 2025. Over the last five years, Forestar invested nearly $6.7 billion in land acquisition and development and delivered over 70,000 finished lots to local, regional, and national homebuilders.
While we acknowledge the potential of FOR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than FOR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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