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Home rental companies emerge as investor safe haven

Share prices of companies such as Invitation Homes and American Homes 4 Rent have outpaced the rest of the market

(Credit: iStock)
(Credit: iStock)

Wall Street has found a new darling in single-family-home rentals.

Companies with large portfolios of rental homes in the suburbs are weathering the coronavirus storm — and investors think there’s more runway in the future, according to the Wall Street Journal. Some of the largest such companies including Invitation Homes and American Homes 4 Rent have seen shares rise by 55 percent and 37 percent, respectively, outpacing the broader stock market.

Now, investors are expecting the pandemic to make single-family homes in the suburbs even more attractive — and difficult — to buy.

As many sectors of the economy began to shut down in March, the survival of single-family-rental homes was not seen as a sure thing. Shares of Invitation and American Homes both dropped over worries about how many people would pay rent.

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However, their stocks have since bounced back, as rent collection and tenant retention have both held up better there than in commercial properties and apartments. Invitation reported on-time rent payments for May that were better than average and record occupancy of its approximately 80,000 houses. American Homes said it was not too far below its pre-pandemic occupancy or rent collection levels.

Executives from Invitation said its strength came from a shift to promoting cheaper occupancy instead of higher rents and from the fact that its typical tenants are dual-income households making about $110,000. Invitation and American Homes both said they have seen an increase in leasing activity in recent weeks.

Invitation CEO Dallas Tanner said the country could still see demand outpace supply for new suburban homes.

“We’re still going to have the fundamental lack of supply to meet normal household formation,” he told the Journal. “There are 65 million people between the ages of 20 to 35 coming our way.” [WSJ] – Eddie Small

 

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CoronavirusHousing MarketRental Market