America's biggest institutional homebuyer just got bigger

At the height of the Pandemic Housing Boom, institutional rental operators like Invitation Homes were on buying sprees. In Q3 2021 alone, Invitation Homes, which Blackstone helped to build before divesting in 2019, was a “net buyer” of +1,523 single-family homes.

However, as interest rates began to spike last year, many of the major players slowed down their acquisitions. Invitation Homes, for instance, became a “net seller” for three consecutive quarters, unloading -233 homes between Q3 2022 and Q2 2023.

But their "net seller" status didn't last long. Invitation Homes, the nation's largest owner of single-family rentals, is once again a "net buyer." At the end of Q3, they owned 84,697 single-family homes, up from 82,837 homes the previous quarter.

In total, Invitation Homes bought +2,291 homes in the third quarter while selling off -416 homes. Thus, they added +1,875 homes on net in the quarter.

This development comes as no surprise; back in July, Invitation Homes announced its acquisition of a portfolio of around 1,900 homes (it ended up being 1,870 homes) from another institutional investor. (Invitation Homes bought the homes from Starwood, whose REIT faced an uptick in redemption requests and continues to endure pain in the commercial real estate sector).

Here’s how Invitation Homes CEO Dallas Tanner explained the deal to investors on Thursday’s earnings call: “Our multiple channel growth strategies allow us to nimbly deploy capital across a variety of acquisition channels, which allows us to be opportunistic depending on the channel that is most attractive in the various real estate cycles. During the third quarter of 2023, we took advantage of several unique external growth opportunities, this included our previously announced portfolio acquisition of 1,870 wholly owned homes for a contract price of $650 million in July. As we disclosed, we acquired the portfolio of homes in a year-one yield in the mid 5[%]s, and we anticipate this to grow into the 6[%]s in the next year.”

In other words, we are amid a choppy period in the real estate cycle—in particular for operators that also have office space in their portfolio—and Invitation Homes wants to take advantage when the opportunity arises.

In the third quarter, Invitation Homes [INVH] reported revenues of $617.7 million (up 8.6% year-over-year) and a net income of $132.2 million (up 68% year-over-year).

Invitation Homes’ average single-family rent rose to $2,321 in Q3 2023. That’s up 6% from $2,189 in Q3 2022, and up 16.6% from $1,991 in Q3 2021.

On Thursday, Invitation Homes CEO Dallas Tanner told investors he remains bullish on the single-family rental business.

"Favorable fundamentals have continued to drive strong tailwinds for our business, in particular, these include the continuing supply and demand imbalance we frequently mention. By most estimates the U.S. continues to face a housing shortage of several million units. At the same time, the demand for single-family homes for lease continues to remain robust, due to favorable demographics, a growing desire for flexibility and convenience. And soaring mortgage rates that make leasing one of our homes much more affordable and attractive than owning a similar home. According to John Burns, it's now over $1,100 per month cheaper to lease than to own, on average, in our markets. That's over $13,000 per year in savings that our residents can use to help their families thrive,” Tanner said on Thursday’s earnings call.

Tanner also added that: “we remain committed to bringing new supply to the market through our extensive homebuilding relationships.”

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