SFR REIT New Lease Rent Growth Trends
Real-time estimates of new lease rent growth for INVH, AMH, TCN, historical rental trends by metro, and more.
Executive Summary
Using data collected internally, we’ve captured the rental listing history for 90%+ of properties owned by public SFR REITs - Invitation Homes (INVH), American Homes 4 Rent (AMH), and Tricon (TCN).
Estimates of new lease rent growth based on rental listing history has been accurate historically, achieving an r-squared of 0.94+ across all three funds when compared with publicly reported quarterly financials from Jan 2020 to present.
For all funds, new lease rent growth has slowed considerably compared to 2021-2022. Funds are more frequently cutting the price of listings to find tenants.
The last section of the post is available to paid subscribers, showing portfolio-wide new lease rent growth for each fund through Q4 2023
Note: new lease rent growth is one of the leading KPIs for these funds, along with rent growth for existing leases and vacancy, and may be useful to investors evaluating these publicly listed companies.
Introduction
Using rental listings mapped back to Invitation Homes, American Homes 4 Rent, and Tricon, we took a look at historical calculated values for annualized rent growth on new leases compared to reported quarterly figures from the companies in their financials.
Over 41 reported quarters with new lease rent growth available as a metric since Q1 2020, SFR Analytics has been able to predict the directional quarter-over-quarter change in rent growth 39 times, a success rate of 95%+. When measured as a correlation between the SFR Analytics calculated value and the quarterly reported value for a company, the r-squared has been 0.98 for INVH, 0.94 for AMH, and 0.98 for TCN.
Data Overview
SFR Analytics tracks hundreds of thousands of rental listings daily.
By combining rental listings activity with extensive entity mapping and reconciliation, it's possible to get a real-time picture of the vacancy, rent growth, and listings price cuts for public SFR REIT portfolios for Invitation Homes, American Homes 4 Rent, and Tricon.
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Analysis & Results
New Lease Rent Growth
Rent growth slowed significantly for SFR REITs in 2023 compared to 2021-2022.
Looking at trends in annualized rent growth for Invitation Homes, American Homes 4 Rent, and Tricon across the five largest MSAs for SFR REIT ownership by volume (Atlanta, Phoenix, Charlotte, Tampa, and Dallas) shows that while funds were able to grow rental income 10%+ during stretches of 2021, pricing power has diminished and annualized rent growth sits closer to <5% these days.
While some markets have held up better than others, rent growth is down across the board and, if trends continue, could become flat year-over-year.
Listing Price Cuts
Public SFR REITs are more frequently reducing the price of their listings to find tenants.
For rental listings removed in a given month, a growing percentage have had a price cut at some point to a value below the initial listing price, suggesting that funds are not able to fetch the values they had hoped. Of course, there can be a bit of gamesmanship in where a listing is priced versus leased and not all price cuts can be considered bad. However, compared to historical rates, each fund is at or near 5+ year highs for the percentage of listings with a price reduction.
Price reductions can be viewed as a leading indicator and an input to rent growth for SFR Funds. Acquisition pace has slowed along with rent growth, with funds struggling to find properties that offer attractive yields, driven by fewer homeowners being willing to sell and larger holding costs associated with higher interest rates.
Portfolio-Wide New Lease Rent Growth
This section is available to paid subscribers, showing portfolio-wide new lease rent growth for each fund through Q4 2023. New lease rent growth is one of the leading KPIs for these funds, along with rent growth for existing leases and vacancy, and may be useful to investors evaluating these publicly listed companies.
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