American Homes 4 Rent ($AMH)

Greetings, and welcome to the AMH First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Nick Fromm, Vice President of Investor Relations. Thank you. Please begin.

Good morning, and thank you for joining us for our first quarter 2026 earnings conference call. With me today are Bryan Smith, Chief Executive Officer; Chris Lau, Chief Financial Officer; and Lincoln Palmer, Chief Operating Officer. Please be advised that this call may include forward-looking statements. All statements other than statements of historical fact included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC. All forward-looking statements speak only as of today, May 7, 2026. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. A reconciliation of GAAP to non-GAAP financial measures is included in our earnings press release and supplemental information package. As a note, our operating and financial results, including GAAP and non-GAAP measures, are fully detailed in our earnings release and supplemental information package. You can find these documents as well as SEC reports and the audio webcast replay of this conference call on our website at www.amh.com. With that, I will turn the call over to our CEO, Bryan Smith.

Welcome, everyone, and thank you for joining us today. 2026 is off to a good start. Our strong first quarter was characterized by solid seasonal demand and excellent execution by our field and asset management teams. Against the backdrop of political and economic uncertainty, our results demonstrate the resiliency of single-family rentals and the strength of the AMH platform. Seasonal demand picked up as expected in the back half of the first quarter despite a slightly later start this year. This resulted in record leasing volumes for March and continued momentum through April. The recent occupancy and new lease spread trajectories put us in a good position as we move through the remainder of peak leasing season. The teams did a great job in meeting the accelerating demand by efficiently turning homes in a period of heightened lease expirations. And their ability to control the controllables drove an impressive reduction in same-home core operating expenses year-over-year. This resulted in strong same-home core NOI growth of 3.7% for the quarter. For April, the leasing momentum from March continued, further improving new lease spreads to 1.2% and same-home average occupied days to 95.6%, representing a 30 basis point sequential improvement. On the investment front, we continue to execute on our 2026 capital plan. During the quarter, we delivered over 500 high-quality purpose-built AMH development homes at a 5.3% average initial yield. As a reminder, this year's moderated on-balance sheet development activity will be match funded with proceeds from our disposition program. Our asset management team did a great job identifying noncore assets and recycling capital in the first quarter, selling over 700 homes for approximately $200 million of net proceeds. Importantly, we continue to see strong MLS demand across all of our markets, demonstrating the resilient value of single-family housing to end-user homebuyers. And finally, we continue to remain active on share repurchases, taking a thoughtful and strategic approach to capital deployment. Over the past 6 months, we have repurchased approximately $360 million of common stock, which represents roughly 3% of total shares and units outstanding. Before I close, I would like to provide a brief legislative update. The discussions in Washington around the 21st Century ROAD Act are continuing as we speak. Our focus remains on ensuring that the role of single-family rental housing is well understood and appropriately represented. We are actively engaged alongside industry partners to support policies that encourage housing supply. We will keep you informed as developments unfold. Most importantly, millions of Americans call single-family rentals home and our focus on providing quality housing with an exceptional resident experience is unwavering. With our leading operating platform and vertically integrated development program, AMH is well positioned as an industry leader to adapt and respond effectively in all environments. With that, I will turn the call over to Chris.

Thanks, Bryan, and good morning, everyone. Like usual, I'll cover 3 areas in my comments today. First, a review of our quarterly results. Second, an update on our balance sheet and recent capital activity. And third, I'll close with a few thoughts around our unchanged 2026 guidance. Starting off with our operating results. The team has delivered a good quarter with solid execution across the board, generating net income attributable to common shareholders of $128 million or $0.35 per diluted share. On an FFO share and unit basis, we generated $0.48 of core FFO, representing 4.6% year-over-year growth and $0.45 of adjusted FFO, representing 8% year-over-year growth. From an investment perspective, we continued executing on our moderated 2026 development plan, delivering a total of 539 homes to our wholly owned and joint venture portfolios during the quarter. Specifically, for our wholly owned portfolio, we delivered 457 homes for a total investment cost of approximately $187 million. Additionally, we saw another quarter of robust disposition activity, generating total net proceeds of nearly $200 million at an average economic disposition yield in the 4% area. Next, I'd like to quickly turn to our balance sheet and recent capital activity. At the end of the quarter, our net debt, including preferred shares to adjusted EBITDA was 5.3x. We had approximately $63 million of cash available on the balance sheet, and we had a $390 million drawn balance on our $1.25 billion revolving credit facility. Additionally, during the quarter, we repurchased 3.7 million common shares for a total of $115 million at an average price of $31.49 per share. And subsequent to quarter end, we repurchased an additional 3.2 million common shares for a total of $94 million at an average price of $29.37 per share. Over the past 6 months, we have repurchased a total of $360 million of common shares representing approximately 3% of total shares and units outstanding and continue to have over $400 million remaining on our existing share repurchase authorization. Lastly, before we open the call to your questions, I wanted to briefly touch on our 2026 outlook. As contemplated in our guidance, after a slower start to January and February, leasing season is now fully underway with healthy demand and strong activity. Additionally, as we saw in the first quarter, the team is doing an excellent job controlling the controllables on expenditures. As a reminder, however, it is still early in the year with the majority of spring leasing activity and move-out season still ahead of us. And with that in mind, we've left our 2026 guidance unchanged and continue to remain optimistic on our position moving forward. As demonstrated by this quarter's results, our operating platform is clearly firing on all cylinders. The positive inflection in April new leasing spreads is a great reminder of the resilient demand for single-family rentals and our prudent approach to capital management continues to create value into the balance of 2026 and beyond. And with that, thank you again for your time, and we'll open the call to your questions. Operator?

[Operator Instructions] Our first question comes from the line of Jamie Feldman with Wells Fargo.

This is Conor on for Jamie. New leases experienced a solid 200 bps acceleration versus 1Q. Can you unpack what drove that inflection? How would you describe the spring leasing season versus typical seasonality? Are there certain markets that are key drivers? And how are May trends comparing so far?

Conor, Lincoln here. I appreciate the comments on new leases. We're -- as Chris mentioned in his prepared remarks, we're pleased with the way that the season has kicked off here. What you're seeing in new leases is driven primarily by a balanced approach to our revenue management strategy. We have -- we've seen great activity at the beginning of the year and that's driven both improvements in occupancy and rate. As we mentioned before, it got off to a little bit slower start, but the May and April results saw great leasing activity. We think of that in terms of 15% incremental over last year. As we've talked about before on the seasonality piece, we expect to continue to build rate and occupancy into the season here. We're right in the thick of it. And we can expect on May and June to build some occupancy incrementally. Rate will follow. Again, our objective is to maximize that top line. We'll take this first half of the year to capture as much rate and occupancy as we can. And then as we talked about in the past, we will control the controllables and hold as much of that occupancy as possible. May is feeling really good so far. No change in the great activities that we've seen for the first of the year. So we're encouraged by the season.

Our next question comes from the line of Eric Wolfe with Citi.

You mentioned a second ago that you expect occupancy to continue to build into the future months here. I guess with occupancy coming up so much, are you starting to be a little bit more aggressive on the renewal side? Or are you going to sort of expect to kind of stay around this sort of 3% level and build occupancy? Just curious how you're thinking about sort of pricing going forward versus trying to build more occupancy into the back half of the year.

Yes. Thanks, Eric. What we're seeing on the renewals so far this year is just part of this consistent and balanced approach to our revenue plan. You can see the results of that in the top line. We've had great retention this year relative to renewal offers that we've sent out. As a reminder, full year, we've contemplated in our guide in the 3% area for renewals. First quarter landed at 3.2%. Notably, we're seeing pickups into May and June on renewal rates. So Q2 should land very similar to Q1. And then we're mailing into Q3 now in the mid-3s. So we're comfortable with the way that's moving. We'll continue to find additional opportunity in the back months of the year as that's available to us.

Our next question comes from the line of Juan Sanabria with BMO Capital Markets.

This is Robin Haneland filling in for Juan. I was just curious on the latest on the regulatory front and the probability of stripping out build-for-rent hindrances?

Yes. Thanks, Robin. This is Bryan. The latest and greatest on the regulatory front, just the update to the minute is that the House is working on a response to the Senate Housing Bill, which specifically addressed build-to-rent and had some restrictions. So that remains in discussion today. It's difficult to predict the timing or the exact outcome. But it's important to note that everybody's objective is the same, the policymakers, ours, the industry, and that's addressing housing affordability. The initial bill that was passed by the House, the 21st Century Act, did just that by facilitating the development process, making it a little bit more efficient. And then some of the other additions from the Senate have caused some public concerns, not only just from single-family rentals, but across the homebuilder space and a lot of headlines against that. And so the House has taken that into consideration. It remains to be seen on timing. It remains to be seen on the outcome. But what's important to note, from AMH's perspective, this regulatory attention has really highlighted the importance of having a scalable operating platform and a development platform that we believe can create some additional opportunities for AMH going forward. So we think we're in a pretty good place, but the outcome remains to be seen.

Our next question comes from the line of Steve Sakwa with Evercore ISI.

This is Manus on for Steve. Just wondering if you could touch on how you feel today on additional buybacks, which you obviously were active on kind of G&A versus development starts. So just curious on your kind of capital allocation front, how you kind of sit currently and what do you expect for the next month?

Sure, Manus. It's Chris here. Look, as we're thinking about buybacks more broadly, the right place to start is, as you hear from us all the time, we very much believe in the business, and we believe in the stock. And you can see that clearly demonstrated by the fact that we've been active consistently repurchasing stock over the past, call it, 6 months at this point. We were active during the fourth quarter, active during the first quarter and now into the beginning of the second quarter as well, like we mentioned in the prepared remarks. At this point, cumulatively, we've repurchased about 3% of total shares and units outstanding. And then to your point, looking forward, on top of that, we continue to have over $400 million remaining on our existing repurchase authorization. Like we talked about at the start of the year, we came into 2026 with our capital plan contemplating a couple of hundred million dollars of incremental capital capacity for additional repurchases. That's without taking leverage above the mid-5s. And not all of that has been deployed yet. And then more broadly, we were talking about this last quarter, we continue to have a great opportunity as we think about leaning into dispositions, just like we did in 2025, to potentially free up additional layers of capital as we think about evaluating further repurchases to complement the strategic and long-term value being created by our development program.

Our next question comes from the line of Haendel St. Juste with Mizuho Securities.

This is Mike on with Haendel at Mizuho. Our question is, how are concessions trending by market and in particular, Arizona, Texas, Florida? And what is the current level of concessions in terms of weeks in those markets being offered?

Thanks, Mike. I appreciate the question. As we said in the past, in general, we don't offer concessions on the rent side. We haven't been doing that for quite some time. Especially in our new development communities, we have the ability to match our deliveries with the demand, and so we never build inventory and cause issues where we would need to use those. We do watch carefully concessions in the marketplace that may be competitive with ours. There has been a lot of that. But our product is moving very well and seems to be positioned well in the marketplace. So we're not going to use those.

Our next question comes from the line of Jana Galan with Bank of America.

Congrats on a nice start to spring leasing. I was curious if there's any changes in the move-outs to buy, whether increasing or decreasing, in any of your markets?

Jana, I appreciate the comments. Move-out to buy has remained really consistent where it's been for the last several quarters, just sub-30%. As a reminder, that's essentially where it's been for most of our history. We've seen it come down slightly from the low 30s as homeownership has changed a little bit for Americans. But it seems like for the most part, it continues to be one of our largest reasons for moving out and no anticipated changes to that in the near future.

Our next question comes from the line of John Pawlowski with Green Street.

I have a few questions just to better understand the quality of the dispositions in the last few quarters. I won't ask for precise figures, but can you give us a sense, directional sense on square footage per home, average age of home, the rent versus -- average rent, again, relative to the rest of the portfolio, so we understand how low quality homes these have been in the last couple of quarters?

John, this is Bryan. I don't have the exact numbers in front of me, but for the dispositions in Q1, generally characterized by slightly smaller square footage than the rest of the portfolio. Age, generally for our -- the dispositions, they're older homes, especially when you consider that we're maintaining a pretty good hold on average age because we're delivering brand-new houses into the portfolio. And then it could be characterized by slightly lower rent, too. I think the key factor is that in the vast majority of the cases, these are noncore assets with noncore due to location or maybe some demand characteristics at a minimum. And I also wanted to remind everyone that we had a number of houses freed up last year when we paid off the securitizations that we haven't had access to in a while with maybe a little bit higher proportion or higher weight in the Texas markets. And so you're seeing some of those kind of lower-end homes work through the system.

Yes. John, Chris here. Just to point out one number that I think you may have noticed, but a lot of what Bryan was talking about, you can see that translating into the average net proceeds per property we sold in the quarter, which was plus or minus $200,000 per door, reflective of some of the attributes that Bryan was talking about. Importantly, those homes still generated an average disposition yield in the 4% area, representing a really attractive form of recycled capital. But equally, if not, in certain instances, more important than just the attractive capital recycling is the opportunity like Bryan was talking about to really asset manage, make some really smart decisions and optimize the portfolio at a super granular unit-by-unit level.

Our next question comes from the line of Rich Hightower with Barclays.

So I guess a multipart on development really quickly. So just with, obviously, the price of certain commodities going up quite a lot recently. I'm curious for your estimate of the interplay between that and sort of prospective development yields on the pipeline in place. And then help us understand maybe the pace of development kind of going forward, just given the cloud of uncertainty that currently exists. We'll see how the legislation front turns out. But just give us a sense of how you're thinking about all that right now.

Yes. Thanks, Rich. This is Bryan. I'll start with the inflationary effects that are starting to creep into the marketplace. We're obviously watching it very closely. And the good news for us is on the current developments, we're pretty well locked in on price. And to put it in perspective, our expectation for our vertical costs of the deliveries this year is really right on top, if not slightly down from last year. So the team has done a great job of controlling those costs. We well-publicized what's going on globally, supply chain, et cetera. And it's very difficult to predict what effect that's going to have. I know that lumber has gone up in the near term. If we do see an effect on that, it will be later in the year, but there may be counterbalancing effects as well. It just really remains to be seen how things get worked out. We're likening a little bit to the way we handled, at least within our internal development program, the tariffs of last year. So there was a tariff effect that was counterbalanced by some reduced activity from some of the homebuilders that had some downward pressure on cost of labor. So there are a lot of moving parts. In the event that it persists, we probably wouldn't see that play out in costs until the end of '26 or into '27. We'll be in a much better position to talk about that on the next call. And then relative to our development plans and our capital allocation strategy this year, if you notice, we have anticipated reduced number of deliveries in 2026 relative to 2025. That's one of the benefits of owning a mass development program, you have the flexibility to flex up or flex down in response to current market conditions. In this case, some of the regulatory uncertainty and cost of capital considerations have driven us to that particular output expectation for '26. As we go through and things get worked out in Washington, depending on the outcome, there may be really nice opportunities that could provide a catalyst for the development program. But again, having that flexibility by owning that full stack in-house is really important at this time.

Our next question comes from the line of Adam Kramer with Morgan Stanley.

I just wanted to ask about same-store expense growth. I think it decreased modestly in the quarter. Just wondering sort of what the drivers of that were, if any of that was maybe onetime in nature or sort of expenses shifting to another part of the year. And then maybe just generally update on insurance. I assume it's a little bit too early in the year to start talking about taxes, but to the extent that there's any incremental data or nuggets on property taxes, that would be great to hear.

Yes. Adam, Chris here. Yes, sure. I can just run down the list. Property taxes, the summary is, in general, no major updates. As everyone probably recalls, first quarter is a pretty quiet time of year for new property tax information. So full year outlook still unchanged in the 3% area. A reminder that the bulk of assessed values come back over the summer months. Tax rates are typically released much later in the year, late third quarter into the fourth quarter. On insurance, you may recall that our insurance renewal is done at this point. It's actually completed at the end of February. So we knew about it at the time of the guide, so contemplated in our full year outlook. The feedback that we heard is that the market has continued to recognize the outperformance of our program, and you can see that reflected in the success of this year's renewal, where we saw our 2026 insurance rates decrease by about 10%. So good renewal there reflected into the outlook. And then on controllable expenses in the quarter, I would say we've got a couple of different things going on, a little bit of a combo, in part, a little bit of timing just in terms of year-over-year comps. But then also, probably more importantly, just really great execution from the teams like Lincoln was talking about. And just to underscore that a little bit more, it's especially notable when you consider the increased level of scheduled expirations we had on deck this quarter given the ongoing maturity in the lease expiration management program. That translated into a slightly higher level of move-outs this quarter. You can probably see that in quarterly turnover rate on the same-store page. And the team was able to do a really good job processing that volume quickly and very efficiently, still delivering a year-over-year decrease in controllable expenses even with an uptick in year-over-year move-outs.

Our next question comes from the line of Jesse Lederman with Zelman & Associates.

So your guidance implies an occupancy lift through the end of the year. Just looking historically, the only year occupancy didn't moderate from 2Q to 4Q was in 2020. Obviously, you had the kind of post-COVID demand lift. And it seems like you still do have some wood to chop on the new move-in pricing to get to flat for the year based on where you are through April. So just curious if you're still expecting new move-in pricing to be flat and what gives you confidence you can achieve a stronger-than-seasonal occupancy and new move-ins in the back half of the year.

Jesse, thanks for the question. Yes, you're correct to notice the slight differences this year and the way that we're thinking about seasonality in the curve. Again, front half, build occupancy and rate; back half, hold as much as we can. There are a few notable differences about this season. Number one, we're contemplating flattish new lease rate growth for the year, and that's in support of this overall optimized revenue strategy, which is intended to support occupancy. The second piece that's very important is that our lease expiration profile in the back half of the year is extremely low compared to where it's been in the past. So we think that will help as well. And then we're hoping for a slightly improving supply picture, but we're watching that carefully as well. So there are a lot of different things going on this year that are different than previous years. And we think that we have a good plan.

And Jesse, Chris here. You made a comment about the shape of new leases, just to make sure we're on the same page. I would say, as Lincoln was talking about new leases very much tracking according to plan, just to make sure we understand kind of the shape and expectations over the course of the year. As we know, we are building occupancy in the first quarter, modestly negative new leases, translating and inflecting positively in the second quarter that Lincoln was talking about, that we expect to build a touch more on into May. But as we get into the back part of the year, like we talked about last quarter when we were initiating the guide, we still are expecting new leases to naturally reflect the typical seasonal curvature in the business, and it would be natural to expect some level of moderation in new leases as we get into the third and fourth quarter.

Our next question comes from the line of Ami Probandt with UBS.

You mentioned the initial yield on the developments of 5.3%. What's the stabilized yield? And what are you targeting in terms of a spread for your developments versus your cost of capital?

Ami, this is Bryan. Yes, the 5.3% yield that I cited in my prepared remarks is the going-in yield that's upon delivery and actively delivering communities, active construction sites. I think it gives a good indication of the level of demand for our houses and our product. Earlier in the call, Lincoln was asked about whether we were offering concessions, and we're unique in the marketplace and that we don't. We don't need to. In fact, one of the interesting things that we've leaned into this year that's new is our pre-leasing efforts. And we're -- we've designed our program now to offer these houses well in advance of the certificate of occupancy. And the uptake on that has been fantastic. If I remember correctly, the statistics, even though this program is still in its infancy, we leased over half of our new deliveries before they were ready. So pre-leased over half of our new deliveries for the month of March. So anyway, there's great demand, but I want to make sure that we look at this from the perspective of the going-in yield. And then upon stabilization, which we've defined in the past as completely completed community, maybe been through 1 turn cycle, we've seen yield improvement. The best way that I could think about it in terms of that momentum that we've given is to put it into the context against the scattered site and what we're seeing in the same-home pool. And the behavior of the new development communities relative to the scattered site portfolio is right on top of each other in terms of occupancy as we sit today. The rate growth is similar. So from the revenue side, it's pretty similar. But the stark contrast is the difference in the total cost to maintain that we see. Total cost to maintain, meaning the maintenance costs, the turn costs and CapEx. And we're operating these new development homes at a fraction of what it costs to operate the scattered site homes. And you can see the effect of that as more and more of those come into the same-home pool with the idea that our total cost to maintain has gone down by 5% since 2023. So although we're not in a position to give exact yields with a lot of the moving pieces, they're performing as we expected, and we look forward to many more good things to come.

Our next question comes from the line of Brad Heffern with RBC Capital Markets.

It feels like the regulatory uncertainty is having an impact on future supply. When do you think we'll start to notice that in the fundamentals? And then do you think that, that's something that's likely to stick around sort of regardless of what the regulatory outcome is?

Yes. Thanks, Brad. It definitely has affected supply. It's been widely discussed as the effect of the headlines that we've seen this year on capital coming into the space. So I think it will have probably a more immediate effect on the build-to-rent projects. I believe a lot of them that were in flight will get completed, but it's changed people's outlook. It goes back to something that I said earlier, too, it highlighted the importance of scale and the importance of having the operating platform that can be nimble and adjust to any sort of regulatory changes. We don't expect to immediately see the effect on supply. But depending on what gets passed, as I spoke of earlier, anything that restricts supply is going to be bad for housing affordability. The existing rental units that we have maybe been looked at with a premium. We're optimistic though that, that won't be the final outcome. Anyway, in a nutshell, we've seen an effect today. We don't know how long-lasting it's going to be. But putting that into the context of an already improving supply profile puts us in a good position as we get through this year and the next.

Our next question comes from the line of Peter Abramowitz with Deutsche Bank.

Yes. Most of my questions have been answered, but I just wanted to follow up. I think you had a comment earlier that the seasonality and the rate of expirations is a little bit lower in the fourth quarter this year. Just kind of curious what's the dynamic that caused that shift? And I guess now that, that's how the lease book looks, is that something that you expect will happen kind of regularly in future years going forward?

Yes. Thanks, Peter. What you're seeing is the result of our intentional alignment of our lease expiration schedule. We've talked about that in the past as shifting expirations from the back half of the year to the front half, where we have more opportunity to lease to gain occupancy and to build rate. We've done the broad lifting on that side. Think of the balance between the first half and the second now is 2/3 in the first half and maybe 1/3 in the second half. Again, that's been very intentional just relative to what we know about seasonality and the activity that we see in the back half of the year. So that will continue. We'll continue to make refinements to that as we lean into lease expiration management and communities and get a little bit more precise on months, days and weeks of expiration. So very much intentional and we'll continue that effort.

Our next question comes from the line of Jade Rahmani with KBW.

This is Jason Sabshon on for Jade. I was just curious if you've seen any movement in pricing from sellers or in development yields based on any of the uncertainty that we've been seeing from regulation or the rate environment.

Jason, this is Bryan. I think some of the uncertainty that we've seen this year has really put a pause on a lot of the transaction market. What we have seen though is more of a willingness from some of the midsized operators to discuss ways that they could partner with us. Nothing has happened because of this kind of overhang, but we do believe that it creates some opportunity going forward. Again, it goes back to my comment about the value of having the operating platform and in our case, too, the development platform. So things might be a little bit on pause in the transaction market, but we're optimistic that, that will change eventually.

Our next question is a follow-up from the line of John Pawlowski with Green Street.

Chris, there's been a lot of churn in the same-store from dispositions and then homes getting added to the held-for-sale bucket. Can you give me a sense just how much lift to full year '26 expected same-store revenue growth, the disposition and held-for-sale activity has had?

You're right. At the start of any year, we are resetting of the pool. This year, the pool grew by about 1,500 units, which is largely newly constructed homes, delivered over the last couple of years and have now stabilized and matured their way into the same-home pool. Also each and every quarter as homes vacate, we can inspect them and finalize the decision as to whether or not they are appropriate disposition and capital recycling candidates. But to your point in terms of same-store revenue growth, keep in mind that when we reset the pool, we're obviously -- statement of the obvious here, we're resetting both current and prior year pool. So any changes, whether it is new homes coming in when we are resetting the pool annually or identifying homes for disposition, they're coming out of both periods, current and prior period. Also keep in mind that if there is a home that is an appropriate disposition candidate, more likely than not, it would have been occupied in the prior period, right? So it is apples-to-apples by the time you reset the pool and have the same composition of properties in both the current period and prior period for comparison.

Our next question comes from the line of Ami Probandt with UBS.

I was wondering what do you think led to the slightly later than normal start to the peak leasing season? Is this weather or just general lumpiness? Or is there something a factor that you could point to that may be driving the trend?

Yes. Thanks for the follow-up, Ami. Look, the shape of every year is a little bit different, and there are a lot of different factors that go into that. You mentioned one, weather can definitely play a part on that. There was some weather this year with the abnormally cold season across many parts of the country where we operate. Some of that can be uncertainty, whether that's on the regulatory front. There's a lot of things going on in the world right now or just financial uncertainty. We're not sure exactly what drives that from period to period. We're encouraged that despite the late start, we're seeing excellent activity this time of year, and we expect that, that will continue throughout the season here. So regardless of what happens from period to period, we're prepared to respond to those with the appropriate operational adjustments.

Our next question comes from the line of Jesse Lederman with Zelman & Associates.

Just wanted to dig in a little bit more. I know there was a comment on the supply profile already improving. Would love any color you can provide, whether that's in the more supply-burdened markets, in particular. Any color on supply potentially clearing up here would be awesome.

Yes. Thanks for the follow-up, Jesse. Yes, we do see supply generally improving across most of our markets. We're encouraged today, especially with the amount of demand that's in the marketplace this time of the year during leasing season that can help us to consume through some of that. We've also talked a lot about moderation in starts and deliveries. I think most people can see in the data that's coming across. Burns, as an example, released his outlook on apartment deliveries for '26, which shows a 40% reduction year-over-year. That's encouraging. Same type of trend is happening on the BTR side, especially with some of the regulatory uncertainty and maybe cost of capital environment. So in general, we think that there are some things that are happening that are very good. On the other hand, there's still some standing inventory in some parts of the country that needs to be consumed. And the rate at which that gets consumed is going to vary market by market, depending on how much is there and what the demand profile for those particular areas look like. We still see heavy inventory in Arizona and Texas, and it's going to take a little bit longer probably to work through some of the things there. But we're also seeing great signs of life in many of our markets. You can see that in some of the improvement this season. All of our markets currently are running -- almost all the markets are running north of 95% with continued incremental improvements into the season. So as we move forward, we'll see how that turns out in each of the markets, but encouraged that we're seeing signs of life in some places and know that we still have some work to do in a couple of markets.

Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

I was just curious, kind of piggybacking off the last question a little bit. So with supply potentially starting to improve in some of these markets, would you expect the spread between your Midwest markets to start to converge with some of the Sunbelt markets over the next 12 to 18 months, call it?

Yes. Thanks for the question, Austin. I think what happens on the convergence of those spreads probably has more to do with what happens in the Sunbelt and what happens in the Midwest. The performance in the Midwest is projected to be very strong for the next several years. Rate growth, as an example, migration and supply all seem to have great profiles for several years now. As the other markets improve, I'm sure that we'll see some convergence of those, but it probably has more to do with what's happening outside of the Midwest, which continues to be very strong.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to management for any final comments.

I want to thank you for your time today. I hope everyone has a good weekend, and we look forward to seeing many of you at NAREIT next month. Bye.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.