Why This Under-the-Radar Stock Is a Hidden Buy in Today’s Stock Market

Although the COVID-19 pandemic will eventually pass, the rumble of fundamental change in real estate is unmistakable. The health crisis has meant working remotely, job loss, and awareness of infection vulnerability in densely-populated urban areas. These are all factors in deciding where to live. If you add in the scarcity of homes to buy and the resultant high prices, the equation changes even more.

Leasing activity for suburban single-family homes has increased in recent weeks for Invitation Homes (NYSE:INVH) and competitor American Homes 4 Rent, according to The Wall Street Journal. The Journal elaborated, “Rental executives say some recent move-ins chose to rent instead of buy given the economic uncertainty. Others have leased houses to get out of apartment buildings, given the contamination risks associated with close living.”

With almost 80,000 homes for lease in 16 markets across the country, Invitation Homes is the largest single-family landlord in the United States, making it uniquely positioned to take advantage of leasing demand growth. The majority of its properties are located in the western U.S. and Florida, in areas with rapid household growth. In each region, Invitation Homes concentrates its inventory in safe neighborhoods close to schools and business districts. This sets the company up for solid long-term growth.

Single-family home demand is met by leasing

A number of people relocating in the current environment ordinarily might prefer to buy rather than rent, but the scarcity of homes for sale has pushed prices up. Many consumers don’t want to buy such an expensive asset that may be overvalued at the moment. Also, household formation is strongest in the 20 to 35 year-old range, and that generation has been squeezed financially. Having, for example, $50,000 available for a down payment may not be feasible for many households. 

A slowdown in construction is contributing to the shortfall in homes available for purchase, which is also working in leasing’s favor. “We’re still going to have the fundamental lack of supply to meet normal household formation,” said Invitation’s Chief Executive Dallas Tanner. “There are 65 million people between the ages of 20 to 35 coming our way.” 

Indeed, demographics point to continued growth in single-family leasing demand over the next decade. Millennials are starting to build families and want more space, particularly a yard or garden. The work-from-home trend is likely to continue after the pandemic, which will drive demand for homes with separate quiet space, such as home offices. And many consumers must defer home purchases due to high student loan debt.

Invitation Homes targets high-income customers in…

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