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Due to the current high interest rate environment, most real estate stocks are trading below or at fair value. Moreover, there has been a lot of fear about the real estate market over the past couple of years. These fears are not unwarranted, but I think the real estate market has proved more resilient than many would have expected.

Many companies in this sector have weathered high interest rates and could start climbing again as interest rates come down. Houses are in high demand right now due to migration trends and changes in modern family units. Nearly 30 percent of American households comprise a single person, a record high. And that data is from 2023.

As these megatrends accelerate, I believe it makes sense to buy the dip on some of the top real estate stocks. Here are three to consider right now.

Realty Income (O)

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Realty Income (NYSE:O) invests in single-tenant commercial properties across the U.S., U.K., and Western Europe. I believe this real estate play has been unfairly punished, creating a compelling opportunity for patient investors to scoop up the stock at a tasty 5.9% dividend yield while waiting for a recovery.

Yes, Realty Income missed Q1 earnings estimates, reporting only 16 cents of earnings per share as higher rates and economic volatility pressured the company’s bottom line. But let’s not overlook the mega trends working in their favor. Rental revenue surged nearly 40% year-over-year to $1.21 billion, blowing away estimates by over $108 million. Management is guiding for full-year revenue growth exceeding 22%. This guidance has been fueled by people returning to the office following the pandemic and the rise of flexible leasing. The company’s property numbers have well over doubled since 2020.

Moreover, Realty Income’s portfolio occupancy remains rock-solid at 98.6% with a well-laddered lease expiration schedule. And with almost $4 billion in liquidity, the company’s fortress balance sheet provides ample flexibility to navigate near-term headwinds. As economic volatility subsides, I expect the stock to regain its footing and deliver outsized total returns.

UDR Inc (UDR)

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UDR (NYSE:UDR) is a real estate investment trust that owns and operates apartment communities across the United States. I believe the stock is poised for further appreciation after bottoming out in October 2023 and gaining nearly 29% since.

One of the biggest mega trends working in UDR’s favor is the ongoing shift towards smaller family units. This is increasing demand for rental housing, particularly in the urban markets where UDR operates. The New York Post noted that renting an apartment is currently 60% more affordable than owning a single-family home in UDR’s markets. The company beat both the top and bottom line estimates, and you can sit on its 4.2% forward dividend yield as the stock recovers.

While UDR’s portfolio is concentrated in the Northeast and West Coast (where population growth may be less robust), these regions are also seeing constrained new supply. This limited construction activity should support healthier rent growth and occupancy levels. Plus, as migration to the South appears to be plateauing due to heat-related issues and rising housing costs, UDR’s coastal focus could prove advantageous in the long run.

Equity Residential (EQR)

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Equity Residential (NYSE:EQR) is a real estate investment trust that focuses on acquiring, developing, and managing high-quality apartment properties in prime locations. I believe this REIT is nicely-positioned to benefit from powerful mega trends driving the rental housing market.

Equity Residential seems to have found its footing in Q1 2024. The company delivered same-store revenue growth of 4.1%, net operating income growth of 5.5%, and a solid 6.9% increase in normalized FFO per share. This may not be the cheapest apartment REIT out there. However, I think EQR’s 3.95% dividend yield provides decent compensation as you wait for the stock to reflect the company’s improving fundamentals.

Management noted robust demand in their coastal markets driven by well-employed, high-earning renters in booming sectors like tech and financial services. The company mostly operates in these markets.

Equity Residential expects this positive momentum to accelerate into prime leasing season. This should potentially lift the stock further, as investors recognize this REIT’s recovery potential.

On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.