Invitation Homes

Housing

Invitation Homes boasted that its lease growth were accelerating but were more affordable due to rising mortgage rates 

The CEO of Invitation Homes told analysts that “Lease growth continued to accelerate, including a blended rate of 11.8% that was 380 basis points higher year-over-year.” “DALLAS B. TANNER, CO-FOUNDER, PRESIDENT, CEO & DIRECTOR, INVITATION HOMES INC.: Thanks, Scott, and good morning. I’m excited to speak with you today following the release of our second quarter results. The state of the business remains very healthy. Second quarter average occupancy was 98%. We set a new record with trailing 12-month turnover at only 21.3%. Lease growth continued to accelerate, including a blended rate of 11.8% that was 380 basis points higher year-over-year. And same-store NOI growth was 12.4%.” (Q2 2022 Invitation Homes Inc Earnings Call, 7/28/2022) 

The COO of Invitation Homes: “New lease growth rate accelerated throughout the second quarter, with June’s 17.9% result surpassing May’s 16.5% and April’s 15.4%” “CHARLES D. YOUNG, EXECUTIVE VP & COO, INVITATION HOMES INC.: Next, I’ll discuss the current leasing environment. We continue to see strong demand through the second quarter into July. New lease growth rate accelerated throughout the second quarter, with June’s 17.9% result surpassing May’s 16.5% and April’s 15.4%. Blended rate growth was 11.8% for the second quarter, up 380 basis points from last year’s strong results. As we sit today, leads are at or near 3-year highs, while our application volume remains in line with the last 2 years.” (Q2 2022 Invitation Homes Inc Earnings Call, 7/28/2022) 

Invitation Homes saw its strongest lease growth in Las Vegas, Phoenix, and Florida, with new lease growth “significantly exceeding” the growth for lease renewals. “CHARLES D. YOUNG, EXECUTIVE VP & COO, INVITATION HOMES INC.: Markets with the strongest new lease growth continued to include Las Vegas and Phoenix, and now also include South Florida, Tampa, Orlando as well, reflecting the continued strength of the Sunbelt. Further, with our new lease rate growth continuing to significantly exceed renewals, we remain — we maintain a sizable loss to lease that we estimate to be approximately 16% across the portfolio. Together with our historically low turnover, we believe we are well positioned for future rental growth.” (Q2 2022 Invitation Homes Inc Earnings Call, 7/28/2022) 

Invitation Homes COO told analysts that even as leases skyrocketed, it remained more affordable than owning thanks to rising mortgage rates “CHARLES D. YOUNG, EXECUTIVE VP & COO, INVITATION HOMES INC.: While these leasing trends are notable, so too are new resident incomes. Residents who moved in with us for 12 months ending June 30 had an average annual household income that exceeded $131,000. This represented income-to-rent ratio of 5.3x, which means our new residents are spending on average less than 19% of their annual income on housing. Leasing a home has become increasingly more affordable given rising mortgage rates and home prices. According to John Burns’ latest figures, in all 16 of our markets, it is more affordable to lease a single-family home today than it is to buy by a weighted average savings of almost $700 per month or 24%.” (Q2 2022 Invitation Homes Inc Earnings Call, 7/28/2022) 

After being asked if it could raise lease renewals even faster, Invitation Homes said “We’ve been really tough on renewals.”

A Barclays Analyst pressed Invitation Homes on increasing lease renewal growth, if there was “more of an opportunity to maybe be a bit more aggressive there given the overall dynamics in rental housing across your markets?” “ANTHONY FRANKLIN POWELL, RESEARCH ANALYST, BARCLAYS BANK PLC, RESEARCH DIVISION: Question on renewals versus new lease spreads, they’ve converged a bit in the past few quarters. I know you want to be prudent in terms of pushing rate on renewals. That said, is there more of an opportunity to maybe be a bit more aggressive there given the overall dynamics in rental housing across your markets?” (Q2 2022 Invitation Homes Inc Earnings Call, 7/28/2022) 

Invitation Homes’ COO emphasized “We’ve been really tough on renewals. As you can see, we’ve been pushing up almost every quarter, every month for the last year or so breaking into the low 10% here.” “CHARLES D. YOUNG: Yes. As we said from the beginning — this is Charles here. We’ve been really tough on renewals. As you can see, we’ve been pushing up almost every quarter, every month for the last year or so breaking into the low 10% here. Ernie mentioned it, we’re — for September and October, we’re out in the mid-10s, 10.5, 10.4 (inaudible). So I expect that we’re going to stay steady there. And what you’ll see is we’re kind of in really nice new lease spreads, but — accelerating from Q2 to Q3. Naturally, we’ll see that stay high in Q3. But as we move into Q4, you’ll see some seasonal slowdown. And I think those spreads will start to — between the new lease and renewals, start to converge a bit. And given our loss to lease that I mentioned earlier, we think that those renewals are going to stay steady for a little while as we try to catch up and clean up there.” (Q2 2022 Invitation Homes Inc Earnings Call, 7/28/2022) 

Invitation Homes stressed “we don’t have any really hard caps other than where we’re required in California, but we are thoughtful about how we do that and where we go. And you can see we’re still steadily pushing that number up.” “CHARLES D. YOUNG, EXECUTIVE VP & COO, INVITATION HOMES INC.: So we’ve been thoughtful. Low turnover is a good thing for this business. We look at it in terms of our markets and where we think market is. But on an individual home or a submarket, our local teams are really thoughtful around are we pushing the rent too much. We’re not — we don’t have any really hard caps other than where we’re required in California, but we are thoughtful about how we do that and where we go. And you can see we’re still steadily pushing that number up. So we’re going to keep finding that right balance, and I think we’re putting up good numbers overall. (Q2 2022 Invitation Homes Inc Earnings Call, 7/28/2022)