Invitation Homes And American Homes 4 Rent Just Got Interesting (NYSE:INVH)

Core Viewpoint - The Single-Family Rental (SFR) REITs have experienced a significant decline due to potential regulatory changes regarding institutional investors' ability to purchase single-family homes, marking a challenging year for the sector [1][54]. Industry Overview - SFR REITs have shown strong fundamentals, with consistent growth in AFFO (Adjusted Funds from Operations) per share [4]. - The sector has historically achieved robust rental rate growth and high occupancy rates, particularly as renting became more economical compared to owning due to rising home prices and mortgage rates [16][19]. - The influx of new supply in 2022 and 2023 has created headwinds for rental rates, leading to increased competition for existing properties [20][23]. Company Analysis - Invitation Homes (INVH) and American Homes 4 Rent (AMH) are now considered to be in value territory after recent price drops, prompting the company to add them to active coverage [3]. - INVH and AMH own over 85,000 and 61,000 homes, respectively, allowing them to leverage scale for improved margins and customer satisfaction [13][14]. - AMH reported a rental operating margin of 55% and INVH at 56% for Q3 2025, showcasing their operational efficiency [14][15]. Valuation Metrics - The market price of SFR REITs has dropped significantly since late 2021, while AFFO has continued to rise, leading to lower trading multiples that align with the REIT index [40][44]. - INVH is trading at 16.0X AFFO and AMH at 17.8X AFFO, indicating a shift from their historically premium valuations [45]. - Both companies are trading at substantial discounts to their net asset values, with INVH at 68.7% and AMH at 75.7% of NAV [52]. Future Outlook - The near-term AFFO growth is expected to be subdued due to the supply wave, but demand remains healthy, suggesting a potential return to organic growth rates post-2025 [36][37]. - The proposed ban on institutional buying of homes could have mixed implications, potentially reducing new supply while benefiting existing properties [56][57].