Invitation Homes Inc. (INVH) Earnings Call Transcript & Summary

Welcome to the Invitation Homes Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Scott McLaughlin, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning. On the call today, we'll hear from Dallas Tanner, our President and Chief Executive Officer; Tim Lobner, our Chief Operating Officer; and John Olsen, our Chief Financial Officer. Following our prepared remarks, we'll open the line for questions from our covering sell-side analysts. During today's call, we may reference our third quarter 2026 earnings release and supplemental information. We issued this document yesterday afternoon after the market closed, and it's available on the Investor Relations section of our website at www.invh.com. Certain statements we make during this call may include forward-looking statements relating to the future performance of our business, financial results, liquidity and capital resources and other nonhistorical statements, which are subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated. We describe some of these risks and uncertainties in our 2025 annual report on Form 10-K and other filings we make with the SEC from time to time. Except to the extent otherwise required by law, we do not update forward-looking statements and expressly disclaim any obligation to do so. We may also discuss certain non-GAAP financial measures during the call. You can find additional information regarding these non-GAAP measures, including reconciliations to the most comparable GAAP measures in yesterday's earnings release. With that, I'll turn the call over to Dallas Tanner. Please begin, Dallas.

Thank you, Scott, and good morning, everyone. Since our Investor Day last November, we've been focusing on executing the plan we laid out, while serving residents better, running more efficiently and allocated capital in ways that create the most value for stockholders. It's been an eventful year, and I want to thank our associates for staying focused on our residents. Helping families find quality homes they can afford is common ground for us for policymakers and most importantly, for our residents. Last week, treasury released proposed regulations under the 21st Century ROAD to Housing Act that are now open for public comment. Our preliminary read is that the framework is workable, generally in line with what Congress intended. Reviewing the details will remain engaged in the comment process. Millions of American families rely on leasing a single-family home. It's important they continue to have that flexible and affordable choice. Through it all, our associates delivered another solid quarter. Same-store blended rent growth came in at 3%, our best quarter of the year, with renewals at 4.3%. We also grew core FFO per share of 2.4% to $0.48. This performance reflects a resilient business and a team that delivers. Part of this resilience comes from healthy demand for our homes. Based on John Burns data and weighted to our markets, as of September, it was an average over $1,000 a month cheaper to lease a home than to own one. As mortgage rates rise, that gap likely widens. With our average resident staying with us for more than 41 months, this adds up to savings of over $42,000. That's money a family could put toward a down payment on a home of their own if they should so choose. Nowhere is our discipline clearer than in how we've allocated capital this past year. As you've seen, we sold a substantial number of homes in the open market this year, mostly to families buying for their own use. These sales give us real-time read on both value and demand. Since December of last year, our average gross sales price has been approximately $460,000 per home. Meanwhile, at the prices at which we've been buying back our own stock, the market is valuing our homes at only $280,000 each. It's one thing to say our stock is undervalued. It's in order to act on it again and again. And that's what we've done. This past year, we've repurchased nearly $1 billion of our stock, which represents 6% of our shares outstanding, funded in large part by proceeds from home sales. Against our revised full year disposition guidance midpoint of $950 million, we've already sold $833 million through September. We have been pleased with the execution to date. In fact, we believe that we've bought back more stock this past year than any other residential REIT. In addition, the new $500 million repurchase program, our Board just authorized we intend to keep funding buybacks with home sale proceeds whenever our stock trades at a meaningful discount to the value of our homes, guided by market conditions and a disciplined approach to the balance sheet. In summary, our business remains healthy, and leasing offers real value that our residents appreciate. We're focused on earning their trust every day with the same discipline we bring to allocating capital. With that, I'll hand it over to Tim to discuss our operating results.

Thanks, Dallas, and good morning, everyone. The story this quarter is renewal strength, partly offset by softer new lease growth with fundamentals that remain supportive as we head into year-end. During the third quarter, our teams delivered same-store NOI growth of 1.1% year-over-year. That reflects core revenue growth of 1.6% tempered by core operating expense growth of 2.5%. Breaking that down, let me cover revenue first, where rent growth was the key driver. Blended rent growth was 3% in the third quarter, up from 2.7% in the second quarter and 1.6% in the first representing sequential improvement in each quarter of 2026 year-to-date. Looking at the components, rent growth is driven largely by renewals. Renewal rents grew 4.3% in the third quarter, a full point above the second quarter. New lease rent growth was negative 0.2% or 50 basis points better than last year. That is down from positive 1.2% in the second quarter, but in line with normal seasonal patterns. Together, those produce the 3% blend in the third quarter. Beyond rent growth, average monthly rent grew 1.8% year-over-year. Turnover edged down 10 basis points to 6.2% and occupancy averaged 96.4% for the quarter. Let me add some additional color, beginning with supply. Supply from large single-family rental operators has been moderating. According to John Burns data, listings were down 13% year-over-year in August, including declines in our 3 largest markets of Atlanta, Tampa and Phoenix. Build-to-rent deliveries also peaked 2 years ago in 2024, and Burns expects the pace to keep slowing through 2027 and 2028. That data tells part of the story. Mom-and-pop landlords matter here, too. They're harder to measure and can play a sizable role within infill neighborhoods. We're also watching the for-sale side. Higher mortgage rates are contributing to greater supply in some markets, resulting in unsold homes from both accidental landlords and builders. In short, the supply picture remains mixed, and we'll continue to monitor it. Though at present, we do not see any signals that warrant a change to our approach. On the demand front, conditions remain healthy. Lead and showing volumes are meeting or beating last year's levels, and we continue to move home steadily through the re-leasing process. Turning now to expenses. Core expenses grew 2.5% in the third quarter and 3.3% year-to-date, which is inside our full year guidance range. Fixed expenses grew just 1.1% in the quarter as slightly lower property taxes offset higher insurance and HOA costs. Controllable expenses grew 4.9%, mostly on higher repair and utility expenses as a result of this summer's extreme heat. Now to October. Preliminary same-store results showed blended rent growth of 2.2%, slightly ahead of last year and reflecting an expected seasonal moderation from the third quarter. Within that, new lease rent growth improved 100 basis points from a year ago to negative 2.2% and renewal rent growth was 4.2%, in line with last year. October average occupancy was 96.1%, nearly flat with a year ago. Beyond the leasing numbers, our teams continue to make progress on several of our Investor Day initiatives, including centralizing our rent collection and HOA functions. We've also advanced our resident CRM system, which lets us communicate with residents on a more personal basis. We look forward to sharing more as we get further along. As we move into the winter months, we'll continue to balance occupancy with rate with the goal of starting the new year from a strong position. Thank you to all of our teams for their hard work behind these results and for their continued efforts as we close out the year. Jon, over to you.

Thanks, Tim. This morning, I'll cover 4 things. An update on our capital allocation activity, third quarter results, the balance sheet and guidance. I'll start with capital allocation since this has been a big focus for us this past year. During the third quarter, we sold 658 wholly-owned homes for gross proceeds of approximately $318 million representing an average sale price of about $484,000 per home. Net of the 216 wholly-owned homes we acquired in the third quarter, most of which were deliveries from our builder partners net disposition proceeds were approximately $245 million. These disposition proceeds went toward repurchasing approximately 8.9 million shares of our stock for $250 million in the third quarter. Since last December and through this past Tuesday, we've repurchased approximately 37 million shares for a total of $989 million at an average repurchase price of $26.78 per share. That represents buybacks totaling 6% of our outstanding shares in less than 1 year's time, while staying within our targeted leverage range. In addition, our board has just authorized a new $500 million share repurchase program, which gives us the ability to continue buying back stock while it trades at a meaningful discount to the value of our homes with the same discipline you've seen from us to date. Turning now to third quarter results. Core FFO per share was $0.48 up 2.4% from a year ago, while AFFO per share was $0.38, up slightly from last year. As Tim mentioned, same-store property taxes were a favorable factor in the quarter down slightly year-over-year. Florida and Georgia together make up more than half of our total property tax expense, and both states send their final bills later in the year. The bills we've received thus far are coming in better than we originally expected, and we'll keep monitoring as the rest arrived and give a final update on our next earnings call. Moving now to the balance sheet. We ended the quarter with $1.3 billion of available liquidity. Roughly 90% of our total debt is unsecured, 90% is fixed rate or swapped to fixed rate and about 90% of our wholly owned homes are unencumbered. Net debt to adjusted EBITDA was 5.5x within our 5.5x to 6x target range and up slightly from 5.4x last quarter. As we discussed on last quarter's call, in July, we issued $500 million of long 5-year bonds with a coupon of 4.95%, and used the net proceeds to prepay about half of our 2017-1 securitization. The remaining $500 million of our 2017-1 securitization matures in June 2027, and we have no other debt maturing before then. Lastly, guidance. You can refer to last night's earnings release for the complete details, but here are the highlights. Based on our year-to-date results, we've raised our full year 2026 guidance for core FFO per share by $0.01 at the midpoint to a range of $1.94 to $1.98 per share. We've also narrowed our full year same-store revenue growth guidance range, lowered our same-store expense growth guidance range by 30 basis points, mostly due to lower anticipated property tax expense and slightly raised our same-store NOI growth guidance to a midpoint of 1.2%. In addition, we've raised the midpoint of our wholly owned disposition guidance by $100 million to a range of $900 million to $1 billion, reflecting the strong execution of our disposition program this year. Looking ahead, our priorities are unchanged. Serve our residents well, run the business efficiently and put capital where it creates the most value for stockholders. This concludes our prepared remarks. Operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Nick Joseph with Citi.

It's Eric here with Nick. You're probably one of the largest home sellers in the market. I think that's probably fair to say. I'm just curious if you've seen any change in your ability to sell as interest rates have risen versus a couple of months ago? And I think at this time last year, you started to see a bit more pressure from some shadow rental supply. So I was just curious about whether you're seeing any of that this year. And if you could maybe give us your expectation for how occupancy should trend over the next couple of months, just given the balance between supply and demand?

Nick, thanks for the question. It's Scott. Listen, we've had a very measured pace of how we've been managing our disposition program this year. As always, we start the year with a pre-identified list of homes that have been identified by our asset management team for disposition. When a house becomes vacant, it goes through our process to evaluate it for sale. I think that as you can see, we've been very successful this year in terms of executing on the sales. What we disclosed in the third quarter is obviously our sales through September 30. The move in the interest rates has obviously happened in the last 30 days, and it's just, frankly, just a little too soon to see what impact it would have on anything going forward. But thus far year-to-date, I think we're pleased with the execution we've seen. We're pleased with our days on market. To date, we've seen no material change in the amount of time it takes us to sell a home. So I think from our perspective, look, we're watching this very closely. The fourth quarter is always our slowest period for the selling season of homes in general. So we'll see where we end up in the fourth quarter. But like I said, this is usually our slowest quarter, and we're watching it, and we'll be able to give guidance when we're ready.

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

Tim, I appreciate the October trends. Could you maybe just talk about where you're sending out renewal notices maybe for like November, December, January? And could you just quickly comment on the bad debt trend, I think that ticked up about 20 basis points in the quarter?

Thanks, Steve. Yes, I appreciate the question. We typically don't share what we go out at on our renewal offers. And we did finish October at 4.2%. I can tell you that November is looking a lot like October. As I've shared in the past, both on earnings calls and in investor meetings, that the renewal book of business, which accounts for 75% of the book generally runs 3.5% to 4.5%. Super reliable part of our rent growth. And look, it's a reflection, I think, of the good service our teams are providing. And as you know, our residents vote with their pin and their pocket book. So again, that 75% book of the business is an important part. I'd say we're cautiously optimistic about the balance of the year. And we're going to watch those renewal rates closely. You asked about bad debt. Look, bad debt was 75 basis points for the quarter. I'd point out that over the course of the year, we are at 60 basis points of bad debt. Right in line with our pre-pandemic range of 40 to 60 basis points. We're going to continue to watch that in the fall. As we've talked about in the past, there is a degree of seasonality that comes with bad debt that we typically see come into the system in the second half of the year. But that's a pretty normal course of business for us.

Your next question comes from the line of Jamie Feldman with Wells Fargo.

Between the acquisitions completed during the third quarter and pathway consolidation, you increased your exposure in several markets where leasing remains softer due to supply. Can you distinguish how much of that reflects existing homebuilder commitments or the pathway reclassification versus a deliberate decision to add capital in those markets? And what property or submarket characteristics give you confidence in the long-term returns in those markets despite weaker near-term lease pricing?

Sure. I'll start with just the pathway observation. The pathway was showing up in our financial statements previously in management fee income now that we have consolidated those homes. You'll see management fee income tick down. NOI will step up commensurately and we'll have a little bit of a good guy just because our cost of capital is better and we'll no longer be paying certain fees that were going out the door. But in terms of footprint, I think pathway is quite small relative to the overall enterprise. So I think we'll evaluate those homes. The investment decisions vis-a-vis the pathway portfolio were not made by us. And so I think as we look at where those 800, 900 homes are, we're pretty comfortable with those markets. And I would note that we effectively already represented 100% of the equity in those assets. The only difference is we have now consolidated those. And so I think from a P&L perspective, it should be neutral.

One other thought, just to add to Jon's -- this is Dallas. We've operated these assets for a number of years. So it wasn't like there was new inventory coming in line with your questioning around adding additional supply. Look, I think the supply question at large is a good one. We've seen it incrementally come down year-over-year. Tim talked about that in his numbers. If last year per se, we troughed, we're seeing new lease being a little bit better at this time of the year versus last. All things being equal to blends also better, call it, 10, 20 bps year-over-year. So we're encouraged by the progress that the market is making in digesting both the new BTR supply, existing homebuilder stock. I think we have to be mindful, and Tim and I watched this and talk about this all the time, is in an elevated mortgage rate environment. It's obviously beneficial for our renewals business, but it could bring additional supply pressure around new lease side. So we'll be mindful of that. We'll watch that over the coming quarters and see what happens with existing homebuilder stock. Does that go into the marketplace in the for rent space? And what do the mom and pops do that are maybe sitting on a home they're trying to sell. Does that then kind of come back into play as well. So it's too early to tell on any of those from a supply oriented story, but it's something we're mindful of and we pay attention to.

Your next question comes from the line of Anthony Paolone with JPMorgan.

You have Nahom on for Tony this morning. I guess could you maybe expand on your expectations and maybe the building blocks you're expecting for 4Q, I think the same-store revenue guide implies a step up in the fourth quarter. Can you help us understand what gets us there. I think Tim mentioned earlier that October occupancy was flat. So just trying to understand where the pickup comes from?

Yes. It's a good question. I think as we look at the fourth quarter, I would point out a couple of things. One, it's a relatively easy comp for us based on what took place in the fourth quarter of last year. And secondly, I think as Tim touched on, we are pleased to see that occupancy is sort of moving in a better direction than it was this time last year. So I think there'll be some benefit from that as well. And as Dallas mentioned, on the blend, we're just seeing a little bit better blended rent growth than we were this time last year. So when we put it together, that is what gives us comfort. I think there's enough of the year left to go that we need to continue to focus on the things that are going to move the needle, and I think we are.

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

I guess a 2-part question. One, just piggybacking on the last question. Is there any preference or comfort level within the same-store revenue range? And part 2 would be, you mentioned the 21st Century ROAD to Housing Act and the detail starting to come out there. Anything you're trying to push back on or get clarified, I think there was something about the timing of when you have to acquire, build for rent and with debt. Maybe limit what you can buy from some of your home bolder programs and the timing of that?

Juan, it's Jon. I'll take the first part of the question, and Dallas can cover the ROAD Act. Look, I mean, there's a reason that our guidance is a range. We're not 10 basis points smart one way or the other. I think we are still comfortable with our midpoints. As we look to the fourth quarter, the things I just referenced in my prior response are the things that give us comfort with continuing on with the midpoint we've already established, but we'll see where we are at the end of the year and report back.

Yes. And I'll take -- share some thoughts on the road to housing question. Look, let me start by saying and sort of reemphasizing that the collaboration with the administration and treasury is one that I've been quite pleased with in terms of the ability to engage policymakers and have active discussion on some of these topics. The process isn't finished. I think the first trough that's come out has a 30-day review period. I would imagine not only from our trade association, but many associations are looking at the way the language is currently drafted and probably providing feedback. I would expect we'll provide some additional feedback through this process. By and large, from where it sits today, Invitation Homes feels like it can, for the most part, operate within this framework, albeit there may be a couple of areas we'd like to see some of the language or the way things are written to be slightly improved. And we'll provide that feedback and we'll continue to try to work with our elected officials to land this in a place that's not only commercial, but protects the intent of the bill that Congress passed. So I think by and large, we feel like we're in an okay spot. It's been an interesting year. As you can imagine, we've done a lot of work with our partners in the industry. Also in multifamily and home building to focus on this very important issue, which is how do we create additional housing stock, both in the for rent space and the for-sale pace. We have a lot of data that suggests. Our customers are looking for the flexibility that the 4 lease space services. And so we want to be mindful of that, continue to find ways to innovate and bring more of that supply to the market.

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

Great. You guys have continued to lean into the buybacks as you've highlighted, completing $1 billion around where the stock is trading today. Just given that accretion and arbitrage between selling assets and redeploying in the shares. Why not increase the size of the program? And then I mean, I guess, how should we think about the pace of dispositions in 2027, just given that earnings accretion math? And the attractiveness of that as well as probably the relative quality of what you're selling versus the balance of the portfolio?

Austin, it's John. That's a good question. I think with respect to repurchases, we manage share repurchases within the leverage range we've articulated. As we sell these homes, we are shrinking the EBITDA that the enterprise throws off, and we distribute gains. So sale proceeds don't convert dollar for dollar into buybacks. And so I think the point is that we need to be mindful of the balance sheet. We need to be mindful of market conditions. And those are going to be our sort of 2 north stars as we think about the share repurchase opportunity over time.

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

Guys, I wanted to ask about the setup here over the next couple of months into '27, understanding it's the shoulder months here. Obviously, you're going to balance occupancy and rate. But curious if you're feeling that perhaps, one, you have a bit more pricing power, given slightly higher occupancy versus a year ago? Is there any notable change in kind of the demand versus a year ago? And then some color on earn in for next year? And one last thing. How much of your lease expirations for the year are -- tend to come up in the fourth and first quarters I guess I'm curious on the balance of the lease expiration schedule over the course of the year?

Haendel, this is Tim. Thanks for the questions. I'll cover supply and demand. And then I'll hand it over for Jon on the other end. On the supply side, we keep a really close eye on supply. We're looking carefully in our markets at comparable product, comparable locations, comparable pricing. What I can tell you is broadly across the U.S., we're up slightly year-over-year, but in our markets, in IH markets, our footprint we're actually down slightly year-over-year. Obviously, it varies by market. I think the message that I shared earlier in the year is 1 that I'll reiterate that the year started much higher on a year-over-year basis in January and has certainly moderated over the course of the year. So we like what we're seeing. The one area of focus, and Dallas talked about this earlier, was the mom-and-pop shadow supply. We're trying to keep an eye on that. Too early to tell where that's going to go with interest rates where they are. As we look more broadly though at the housing supply, it's interesting, build-to-rent delivery peaked in 2024. The pace of build-to-rent deliveries are anticipated to keep slowing through 2027 and 2028 based on John Burns data, apartment completions peaked in 2024, so that's on the downswing. And when you compare kind of the homebuilding side, Burns data suggests that single-family starts are forecasted down this year 7% and down another 5% next year. Again, I think our position is fairly good right now in the Sunbelt locations where we are. I think that the -- we think that they're going to continue to perform well. When you look at migration data, which we follow closely, we use Oxford Economics. There is certainly some good signals, although not as high as, say, in a pandemic period, but the Houstons, the Dallas, the Austin, the Tampas and Phoenix and Atlanta, all showing nice signs of movement into the market. On the demand side, look, demand continues to be healthy. We've seen nice demand come into the fall. In line with expectations, perhaps even a little bit above our expectations. I think it's a clear signal that single-family rentals continues to play are really important in the housing ecosystem. And it's a good reminder that 35% of people lease something. Let me break it down a little bit more. external to the company, we look at Google search data. That's up year-over-year. We look at Zillow and their renter demand index, that's up year-over-year. And then when we look internally at our own funnel, we're seeing healthy lead in showing volume, and that's continuing again into the fall. We're seeing nice conversion rates as well. So I think the long-term story for the portfolio is good, and we like how the end of the year is setting up. Look, there's a degree of cautious optimism here as we watch the rest of the year unfold. As for the lease expirations, look, I'll answer the question. We try to put about 55% in the first half of the year, kind of Q1, Q2 and then about 45% in the back half in Q3 and Q4. That mirrors kind of how movement in the single-family space. And I think broadly, how people move and we continue to manage our lease expiration curve to ensure that we keep that -- keep those numbers. Jon, do you want to talk about...

Yes. Haendel. I appreciate the question on earn-in. We're going to hold a discussion in 2027 until we introduce guidance, and we'll talk about our 2027 view holistically at that time.

Your next question comes from the line of Julien Blouin with Goldman Sachs.

Just a question on shadow supply. It looks like when you look at rental listings, increases of mom-and-pops and homebuilder stock in recent weeks, it started to pick up, especially, I think, in Florida. I was wondering if you're sort of seeing that on the ground and whether you're seeing any of that show up in pricing, specifically in your Florida markets?

Look, it's a great question. This is Tim. The supply side, like I earlier is an area that we do track closely. I'd say, South Florida has shown a little bit more supply on the market, but Orlando, Tampa, and even Jacksonville have shown some nice green shoots in terms of less supply year-over-year. Again, when you look at supply numbers, it's tough because people look at different comparable products, we really zone in on again, comparable product in terms of size, comparable location submarket specific and then comparable price because that's -- we don't find that people are looking at everything. They're looking at a fairly narrow product offering and price point. It's hard to tell where the shadow supply that you referenced, there's certainly a lot of articles that we're seeing that talk about accidental landlords and shadow supply, but it's really tough to track. We do our very best capturing information. But remember that the mom-and-pop, sometimes they're posting yard signs. That's hard to track from a digital footprint, but we do our very best to monitor that. And we've got some -- we've got data that we find as very helpful as we look at being nimble pricers in today's operating environment.

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

Just one question on the impacts from dispositions this year on 2026 same-store. I would imagine that would have some positive lift the same-store revenue for this year, but the guidance is unchanged since the start of the year. So Jon, can you just help frame what kind of impact that dispositions have on same-store revenue metrics?

Yes, John. I mean, I would say that it hasn't actually had an appreciable impact that we've been tracking. I mean the reality is the way from an asset management perspective, we think about the homes that we elect to sell that review process, that rebuy analysis is looking at things like location, operational KPIs, how long has it taken that home to lease relative to other homes in the submarket what has our experience been in terms of demand relative to other similar homes in the same area? And what does that tell us about the home's ability to generate property cash flow over time, right? We are risk-adjusted total return investors, and that total return is driven by sort of property level cash flow. So we're not paying a tremendous amount of attention to the specifics of revenue relative to expense. It's just how much NOI is this home throwing off? Do we think we can grow that NOI over time to a degree that allows for an appropriate sort of rebuy total return view? And if not, then we'll go ahead and put that home on the market and move it off the books and seek to redeploy that capital accretively.