We recently compiled a list of the 12 Best Housing Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Invitation Homes Inc. (NYSE:INVH) stands against the other housing stocks.
The US Housing Market: An Outlook for 2025
According to the National Association of Realtors, sales of previously owned homes rose 4.8% in November as compared to October. Contracts for these homes were likely signed in September and October as mortgage rates fell to an 18-month low in September but then moved higher in October. Regarding the future of mortgage rates, Compass CEO Robert Reffkin expects mortgage rates to stay around the 6% range for the next two years instead of rates declining to the 5% range in the next year or even the following. In an interview with CNBC, Reffkin states that the market will improve, with pending applications to purchase a home currently up 10% year-over-year. He considers not having enough inventory to be the key issue. While inventory has climbed over the year which is a positive, it is still 20% less than pre-pandemic levels.
On December 18, The Federal Reserve lowered its benchmark rate by another quarter point marking its third rate cut in 2024. However, mortgage rates rose. For the week ending December 19, the 30-year fixed mortgage rate spiked to 6.72%. Orphe Divounguy, Zillow senior economist, joined CNBC to talk about the firm’s 2025 housing market outlook. He stuck to an optimistic view for the coming year pointing towards mortgage rates easing relative to their current levels which is going to drive higher home sales. Regarding increasing home sales, Divounguy thinks new construction will see more activity. New home sales increased in November regardless of the increase in mortgage rates. Meanwhile, existing home sales are expected to rebound but not that much. Thus, the overall housing market will be healthy considering more homeowners starting to come back to the housing market.
Ivy Zelman, Zelman & Associates executive vice president, countered the above optimistic view as she expects more challenges ahead for the housing market. In an interview with CNBC, she mentioned how the entry-level buyer remains troubled due to affordability issues which are worse off with elevated mortgage rates. As the affordability index is about 25% above the trend line for existing homes and 10% to 15% higher for new homes, the market is challenging.
Our Methodology:
In order to compile a list of the 12 best housing stocks to invest in according to analysts, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 12 stocks from our list which had the highest average upside potential. The 12 best housing stocks to invest in according to analysts have been arranged in ascending order of their average upside potential, as of December 27.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A contemporary single-family house at dusk in a residential neighborhood.
Invitation Homes Inc. (NYSE:INVH)
Average Upside Potential: 19.94%
Invitation Homes Inc. (NYSE:INVH) is the largest single-family home leasing and management company in the United States. The firm offers various options for leasing an updated home in a desirable neighborhood. Invitation Homes purchased its first home in Phoenix in 2012, establishing a vertically integrated, single-family rental home company.
Invitation Homes Inc. (NYSE:INVH) has an attractive position as the premier single-family home leasing company in the country. Invitation Homes Inc. (NYSE:INVH) boasts a portfolio predominantly focused on high-growth markets and infill neighborhoods with proximity to jobs, transportation, and schools. Other than attractive locations, the two pillars around which the firm is strategically positioned are Invitation Homes Inc. (NYSE:INVH)’s unmatched scale and its eyes in the market through numerous in-house investment professionals and operations personnel. Differentiated locations, scale, and local expertise have driven the firm’s organic growth outperformance.
While the CEO Dallas Tanner believes in a constructive backdrop for the firm’s future considering the attractive value proposition of single-family rentals compared to homeownership, Invitation Homes Inc. (NYSE:INVH)’s new lease rent growth disappointed investors. It posted negative new lease growth of -1.3% in October 2024 as it faces increasing competition in the Built-to-Rent sector. Consequently, analysts at Jefferies downgraded the stock to Hold from Buy and trimmed their price target to $33 from $39. However, management remains optimistic about the situation deeming the current supply pressures temporary, with new build-to-rent deliveries expected to fall as much as 65% in 2025.
Overall INVH ranks 9th on our list of the best housing stocks to invest in according to analysts. While we acknowledge the potential of INVH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than INVH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
