America's largest single-family landlord keeps raising rents

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Numerous news articles are addressing cooling in the rental market, including one article Bloomberg published on Monday titled: "Rents are falling in some U.S. cities, thanks to new apartment construction." While these articles are absolutely correct in noting the softening of multifamily rent growth, with some boomtowns like Austin and Boise experiencing outright rent declines, they often overlook a significant aspect: In most markets, rents continue to rise, and, notably, single-family rent growth remains elevated in many markets.

Look no further than Invitation Homes, America's largest single-family landlord, which reports a +6.0% increase in average single-family rent between Q3 2022 and Q3 2023. While this growth is slightly down from the +9.9% increase observed in the previous 12-month period (between Q3 2021 and Q3 2022), it remains elevated above pre-pandemic levels. Comparatively, between Q3 2018 and Q3 2019, Invitation Homes reported a +4.4% rise in average rent prices.

As ResiClub previously reported, Invitation Homes CEO Dallas Tanner said on the recent earnings that 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 their Oct. 26 earnings call.

In total, Invitation Homes owns 84,697 single-family rentals.

Among the major rental markets where Invitation Homes has a presence, the biggest 12-month rent growth was observed in South Florida (+8.8%), Tampa (+7.5%), and Phoenix (+7.2%). The weakest growth occurred in Minneapolis (+4.0%), Northern California (+4.0%), and Denver (+2.9%).

In ResiClub’s conversations with institutional homebuyers, they frequently express a bullish perspective on single-family rents, even if their views on home prices, at times, are mixed.

The last time that U.S. house prices and rents got this far detached (i.e. new monthly payments are far more expensive than rents right now), single-family house prices ultimately crashed in 2008. This time around, Sean Dobson, CEO of Amherst which owns 44,000 single-family rentals, tells ResiClub he believes that single-family rents will increase, which over time should help bridge the gap and improve the acquisition economics for institutional landlords.

According to CoreLogic, national single-family rent grew +2.9% year-over-year in August. That includes a +4.2% jump in “lower tier” single-family rent prices.