Invitation Homes, the nation's largest landlord for single-family rentals, is nabbing discounted new houses from homebuilders as buyers back away from the market at a time of elevated mortgage interest rates and economic uncertainty.
The Dallas-based landlord, with a portfolio of 86,139 single-family rentals as of the third quarter, spend that period "opportunistically buying homes in a one-off basis," as builders stuck with "a lot of inventory," look to shed properties, Invitation Homes Chief Investment Officer Scott Eisen said Thursday in discussing earnings.
He added that "we are able to pick up homes delivering in 30 days at a 20-plus percent discount with almost immediate delivery and we can get them leased in 60 to 90 days."
While price growth has slowed on houses this year, sales of new single-family homes increased in August to a seasonally adjusted annual rate of 800,000, according to a report from the U.S. Census Bureau and the Department of Housing and Urban Development. The total was 15.4% above the August 2024 figure and soared past analyst expectations of 650,000. Sales statistics that would have been released this month for September have been delayed by the federal government shutdown.
In the third quarter, Invitation Homes and its various joint ventures acquired 749 homes in deals totaling about $260 million. In that period, the company sold 316 homes in deals totaling about $122 million. About 70% of its acquisitions were "forward-purchase deliveries," or new builds, Eisen added.
The company has accelerated both its purchases and sales of homes during the first nine months of the year. Through Sept. 30 of this year, Invitation Homes and its joint ventures bought a total of 2,420 homes, compared to 1,699 in the same period of 2024. It sold 1,144 homes in the first nine months of this year compared to 994 in the same period last year, according to the company.
Based on an outlook from company executives "running ahead of where we expected to be," Eisen said, Invitation Homes has raised its financial outlook for the remainder of the year. The company is raising its core funds from operations by 1 cent to $1.92 per share and its adjusted funds from operations by one cent to $1.62 per share. Funds from operations is a closely watched financial indicator for publicly traded real estate investment trusts.
Rental demand outlook steady
Invitation Homes CEO Dallas Tanner said during the call that U.S. housing dynamics support steady rental demand as housing affordability remains stretched and homeowners are still locked into their homes because of relatively high mortgage rates, as well as insurance and property taxes.
"The strength and resilience of our platform with outstanding renewal rent growth of 4.5% with the average tenure of our renters being 41 months gives us the confidence and flexibility to invest in the future," Tanner said. He added that Invitation Homes plans to continue using its homebuilder partnerships as a way to secure new homes.
Invitation Homes also offers a construction lending program for smaller developers, he said. This program was launched over the summer in Houston, with the firm backing a $32.7 million loan to a homebuilder to develop a 156-home property. Those homes now become "strategic acquisition candidates," Eisen said in a statement in June.
During the third quarter, total revenue for Invitation Homes grew 4.2% to $688 million. While rent for renewing leases grew 4.5%, rent growth among new leases declined 60 basis points, the company said. Leading into October and November, Tanner told analysts Invitation Homes would offer discounts to lure new would-be tenants to its properties, resulting in a short-term loss.
With a 70% to 75% renewal rate, executives told analysts the loss was worth it and will help create leasing momentum before the fourth-quarter holidays, typically a slow time in the industry. As of Sept. 30, its portfolio was 96.5% occupied.
Tanner said he sees nothing to suggest any big changes on the horizon in terms of rental demand.
"We'd like to see more homes selling on the market, since that's a good proxy for rent growth going forward, but the business is doing what we thought it would do," he added.
Concerning geographies, Tanner said, renewals have been strong in its Florida markets, but it's been a "different story" on new leases. Atlanta, as well as Chicago and Minneapolis, continue to outperform, he said.
Invitation Homes' board also authorized the company to buy back up to $500 million of shares. In all, the company owns or manages 110,187 single-family rentals.