Key Takeaways: Yesterday CoreLogic released HERE its updated Single-Family Rent Index (SFRI) through April 2021, further reinforcing evidence of the ongoing acceleration in SFR rents, particularly for single-family detached homes in key Sunbelt markets which is key for INVH and Best Idea Long AMH. This dovetails with recent data provided by the REITs showing sequential acceleration in leasing spreads approaching +8% y/y for both companies, which will blend into realized rental rate change results in the coming quarters. As a reminder, we are modeling an acceleration in SSRev growth for both names through 1Q22 approaching the high-single-digit range, followed by a deceleration in the ROC on tougher comps into the +4-5% range over the balance of 2022. It is possible that even these assumptions will prove to be conservative, as growth rate figures are showing non-linearity. Street consensus numbers continue to imply only mid-dingle-digit rental rate growth and numbers need to come up, although it appears the buy-side is leading a majority of the sell-side in adjusting expectations upward. Some key highlights from the report:
- Rising affordability issues, population migration, supply shortages and increased demographic pressure from aging millenials seeking homes have combined to dramatically accelerate rental growth for the asset class
- Rents for single-family detached homes were up +7.9% y/y in April versus +5.3% for the entire data set inclusive of townhomes - largest y/y increase in 15 years of tracking the data
- Best performance by MSA: Phoenix +12.2%, Tucson +10.6%, Las Vegas +9.3%, Atlanta +9.1%, Austin +8.5% and Dallas +8% - important to stress the significant market overlap with AMH with ~28% operating portfolio exposure to Phoenix, Atlanta, Austin, Dallas & Las Vegas as of 1Q, along with ~20% of undelivered lots in these markets
- Worst performance by MSA: Boston -5.9%, Chicago -2.6% (neither market cracks the Top-20 for AMH, INVH has ~3.5% exposure to Chicago)
- Survey data showed that ~50% of millenials and ~64% of baby boomers "strongly prefer" living in a single-family detached home
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
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