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Foreign welcome to episode number 52 of the Rent Roll, your podcast on all things rental housing, apartments, SFR and btr. Today we're diving deep on single family rentals and build to rent. We're going to share the latest data on SFR and BTR trends, specifically on leasing and rents. And the punchline is that the headline narrative is isn't exactly correct. A lot of people, I've talked about this before. A lot of people think that just because home sales are weak, everyone must be flooding into rentals, specifically single family rentals, since they're a closer alternative to single family home buying. But it's just not that simple. It's taking longer to lease out a vacant SFR home. Today, rent growth is more muted than at any point in seven years. That's still a lot better, by the way, than apartment rent growth right now, given the bulk of the supply is concentrated on the multifamily side. But rent growth has slowed in SFR even as home sales have slowed. And many of you have heard me say this before, many of our guests have said this as well, but the two are more correlated than most people think. A rising tide boosts all ships now, of course, SFR and rental housing more broadly. It also has a much higher floor than the more volatile home buyer market. The market is still holding up well. Healthy occupancy rates for the most part. Low turnover, inflationary expense pressures have mitigated a bit, plus a big slowdown in BTR construction starts. Not to mention of course, a very favorable outlook on demographics and demand. So we're going to dive into all that and more with lots of data. And then we'll welcome in Scott Eisenhower. He's the chief Investment officer and Executive Vice president at Invitation Homes, one of the big two single family rental REITs. Scott and I are going to talk shop on SFR Myth busting. I'll ask him about how much he really looks the MLS for buying homes these days and how those opportunities compare to what imitation homes is doing on the new construction side with their partnerships with home builders. And we'll talk about what are those challenge about all the challenges we hear about among home builders and what that means for Invitation. Meaning like are they seeing better opportunities to buy from the home builders today given the challenges home builders are having to sell homes to individual buyers in today's high rate environment. And we'll talk about what markets Invitation likes for the long term much more. So stick with us for that. It's going to be a fun conversation with Scott. All Right before we dive in, I want to give a big shout out to our sponsors. First and foremost, thank you to jpi. JPI is a leading apartment developer with the stated purpose to transform building, enhance communities and improve lives. JPI is a top builder in Southern California and in Texas, expanding to the Southeast and Pacific Northwest. And also a big thank you to Madera Residential, a leading apartment owner and operator and in Texas and also expanding into the Southeast. All right, so we kick it off with Here's a chart and we got a bunch of charts for you today. And I want to start off with these indices from John Burns Research and Consulting that they released earlier this month. It's based on an expansive survey the Burns team does of SFR players. And by the way, John Burns has done the team there has really done a great job on SFR and btr. People ask me all the time about data sources and they're my go to for this sector. The Burns indices are on a 0 to 100 scale where a rating below 50 signals a contracting market. Now, all three of their SFR indices are below 50 right now. Now, just just to avoid any alarm bells here, these aren't falling off the cliff by any means, but slightly below 50 indicating a modestly contracting market so far in 2025. Now the first one is on leasing activity versus seasonal norms. The most recent one covers Q2 in the scores at a 48 compared to a 50 last year and 61 two years ago. So that means that leasing activity isn't great, but it's not terrible by any means, just slightly below normal for this time of year. Again, even with the sluggish home sale market, again, people think, you know, we come buyer market should signal a lot more leasing for sfr. But it's not the case. It never has been. Now again though, SFR is much more stable. We're only slightly below normal, so that's a much higher floor. But no means is it boom times either. Second index is expected leasing activity over the next six months. And it's basically the same story. A score of 47, which is down from 49 last year, 59 two years ago. And so SFR owners and operators are expecting more of the same in the short term, basically. And the third one, I think this is the really interesting one. It's the critical one. It summarizes the current issue very well. It's the SFR vacancy property index time on market versus seasonal norms. In other words, how long are units sitting vacant between leases or homes sitting vacant between leases. The score came in at just 35 compared to 46 last year, 52 years ago. So that means there's more inventory. It's taking longer than normal to lease out a vacant home. And remember, a vacant home generates no income while costs continue. So a longer time market puts pressure on operators. And we're seeing this because first of all, we're seeing still an increase in inventory on the market. This is more competition. It's the growth in inventory from the survey is actually down from last year, but it is still trending up a bit and especially in certain parts of the country, like the Sun Belt. But. But then the other thing is, is so there's more competition. Demand hasn't necessarily picked up to keep pace with the supply. And so again, units sit vacant longer and that's going to put pressure on rent growth. And that's exactly what we're seeing. That's what's playing out with rents. New lease rent growth is down to 2.6% now, still positive 2.6%, but that's the lowest number for SFR since 2018, so seven years. So again, when it takes longer to lease out a home, that puts downward pressure on rent growth. And that's only for scattered site sfr, to be clear, for build to rent, it's much softer, just 0.7% rent growth year over year. And of course, I'm sure everybody knows this point. There's a lot of build to rent supply in the market and it also, it tends to be concentrated in the same markets and also the same submarkets. So where there is some of it, there tends to be a good bit of it competing for a very similar demographic, often a higher income renter who's attracted to a rental community. And so that's putting downward pressure on again, BTR rents as well. We'll talk more about BTR supply here in a moment. Now, to be fair, for context, SFR and BTR are still outperforming multifamily, which is still wrestling with the biggest supply wave in nearly a half century apart. Rents over the same time period were basically flat, up just 0.2%. However, I've mentioned this a lot because I think it's really important. There is a silver lining to all this for operators and it's this wage growth has been outpacing rent growth for 32 straight months. That's almost three years. And that's true of all rental housing sectors, SFR included. And while we've seen some cooling of late in the job market, we're still seeing above normal wage growth, most recently at 4.1% year over year, according to national data, data analyzed by the Atlanta Fed. They put out they have a really good wage tracker you could find if you just Google Atlanta Fed wage tracker. Really, really good data. You could break it into different kind of cohorts as well. So when wages outpace rents, that widens the demand funnel. So long term, you know, that is a win win. Short term, it is a more challenging environment. Now, before we move on from this topic, I want to dust off one of my favorite charts and I've talked about this before. It's the and I teased this earlier on as well. It's one of my favorite mythbusters. It's the relationship between SFR rents and home sales. So again, conventional wisdom headlines, they say SFR does better when people can't buy homes. But the data tells us otherwise. As home sales have slowed, rent growth has slowed. By comparison, in 2021, home sales hit their highest levels since the lead up to the great financial crisis. But you know what else peaked in 2021? SFR rent growth and apartment rent growth too. And we saw this relationship throughout the 2010s. Even in the early 2010s we had the foreclosure crisis, more demand for rentals and the SFR side. And yet there was very little rent growth in those early years. And rent growth didn't really return until the mid 2010s, back when home sales started to rebound as well. Why? Again, a rising tide boosts all ships. That's why I always tell investors, rental housing investors of all types, they should be cheering for a healthier for sale housing market. Now of course, we can't ignore the fact that it is a lot cheaper to rent than rent right now than be a new homeowner. Okay, everyone talks about this all the time. It comes up on all the earnings calls. I'm sure every SFR investor is is sharing some version of this data set with their LP investors and lenders, other partners. You know, right now that Premium is about $1,600 more per month for an apartment renter and about $900 more per month for a single family renter. Pre Covid it was about $600 apartment and closer to break even for SFR renters. So that's not insignificant. But in terms of an impact, the data suggests the big impact is not so much to the new demand. But I think more likely we're just seeing new household formations slowing. Meaning like there's just, there's, there's less net new demand. But the real impact is on the retention side. Renters are renting longer due to the cost of home buying. So that of course has an impact as well. And so when we look and that plays out in low turnover numbers. And yes, we do see that play out there, but even that, I think it's a little more nuanced than maybe the, the narrative suggests. Okay, so here's a chart from John Byrne showing turnover among renters and the SFR REIT properties. And that number was most recently at just 25%. This is total turnover. But if you assume, if you are assuming that turnover just dropped off when mortgage rates jumped, you'd be wrong. In fact, turnover's been trending down consistently for a decade, both for apartments and for sfr. And we see that in this SFR chart, it's leveled off around 25% these last few years, which is very low historically compared to pre Covid levels. But in 2021, I remember I said that's when home sales peaked for the last 15 plus years we also saw SFR turnover at 24% that year. So it's about the same now as it was and home sales were peaking. And so now obviously I still think people are renting longer, but it's a good reminder that while renters are likely to rent longer, it doesn't always mean they're renting with you longer. They can still move. They might just end up at another rental. But also I think, you know, turnover is just structurally lower today than in cycles past. So there are clearly other factors at play beyond home buying trends. I think we just gloss over too much and that could be, you know, improved product, you know, better homes, better management, better technology, you know, certainly much easier. It's more, there's more conveniences today being an SFR renter than there were in the early years of this, of this product. Reduced mobility could be a factor as well, the recent slowing in the job market. You know, all of these things play a role and I don't think so. In other words, I don't want to dismiss entirely the impact of weak home buyer market because obviously it is a factor. At the same time though, I just, I don't think it's appropriate to get or accurate, I should say it's not accurate to give the homebuyer market all the credit or all the blame for whatever happens in the SFR BTR multifamily spaces. You know, so much of housing analysis in our country is viewed through the lens of homeownership and the lens of a homeowner. And I tell people all the time, if you view the rental market only through the lens of a homeowner, you have a skewed view and you're missing the bigger picture. So again, let's not dismiss what's happening in the home buyer market. But clearly there's a lot more going on here and I think that's important for long term investors. All right, I mentioned BTR Supply. Let's talk about that for a moment before we move on. Here's a chart showing BTR deliveries in the next 12 months compared to the prior 12 months by market. And just like apartments, BTR is very elevated right now. Peaked in 2024, still high this year, but it is about to plunge everywhere down more than 50% over the next year in most of the key BTR markets. Nearly all the BTR markets, Dallas, Phoenix, Charlotte, Raleigh, Orlando, Houston, Tampa, Nashville, Riverside, etc. We could go on. Atlanta is more like, I think that's about 30 something percent but still a significant drop off. So that's going to be the big story. The supply story is going to quickly shift in 2026 for BTR and for apartments. But at the same time, you know, here's the kind of the fundamental case for sfr. I don't think it's just about homebuyer trends. I, I really don't. I think I, I will always make the case that I think too many investors focus too much on that. And by the way, the problem that so sorry, circle back on it is if you tell your investors that that's what it's all about, then what are you going to say when the market shifts again when all of a sudden it's more, you know, eventually this will happen. I don't know if it'll be next year, five years now, ten years from now. But at some point that the, the, the big discount to rent versus buy will change, it'll erode. It's the cycles happen. So what do you, how do you explain that to them? Well, instead what I would say is hey look, that the, the home buyer market today is providing a higher floor. It reflects the higher floor farmers. We're seeing low turnover, high stable occupancy. But we also see reduced rent growth Historically when we see more home sales, we have more move outs. We're backfilling those units faster and at higher rent. And so in other words, if I'm, if I'm talking to my investors, I'm saying, look, we could, we can do well in either cycle. But the real upside is in a stronger economy when homes are selling okay, but then going back to the real driver, I think for the next 10 years plus it's demographics, it's the demand tailwinds here are very good as long as the economy holds up, of course, and that's always a big if, and we always have that caveat. But the demographic trends are very favorable. Here's a chart showing population by age. And look at that core SFR demographic. We know that demographic. They're late 30s into their 40s. Um, there are 3.4 million renter households today between the ages of 35 to 44. That's the biggest among all age cohorts. And there are another 3.3 million behind them currently ages 25 to 34. So that's 7 million combined renter household. That's a lot more than they have in the, in the older cohorts. Even in the broader population, we know that our, you know, peak population is going to be the early to mid 30 somethings, that they're going to be more and more aging up into the prime SFR age. Now, of course, some of these people will eventually become homeowners. I don't want to downplay that because again, everything's cyclical. But it's still going to be a sizable demographic. And it's not just the change in homeownership that's impacting this. People are also just. Even before the spike in homeowners, sorry, the spike in mortgage rates, we saw a shift. People waiting longer to get married and have kids, and they value flexibility more than prior generations, which favors renting. And so other structural drivers that go along with these positive demand drivers, demographic drivers. And I think that's the key story for the next decade, not what happens in the home sale market. And, and by the way, the John Burns analysis data of census data, their analysis of sense data, it also shows there are nearly 4 million SFR households today with incomes in the hundred of 100,000 or more. So that's a big pool of folks for whom, generally speaking, rental affordability is not a major hurdle. And that's typically demographic served by the SFR REITs and many of their institutional peers. So that's a big, big factor. And I think it's going to remain a big story through the next couple of cycles. All right, let's shift to our next topic, rental housing trivia. All right, today's rental housing trivia question is factoring all in monthly costs. When was the last time it was Cheaper to be a new home buyer than an SFR renter in the U.S. i'll give you five choices. Was it 2002-2009-2012-2018, or was it 2021? Okay, so think about that and we'll give you the answer here in a bit. Next up in the news. Okay, in the news, this is when we, we look at headlines that touch on issues that impact multifamily and single family rentals and renters. So we got some a mix of headlines this week on different topics. The first one, the big one, comes from the Federal Reserve's meeting last week and the Fed cutting the federal funds rate by 25 bips. Okay, so afterward, the Fed chairman Jerome Powell spoke for one hour. He answered about 35 questions from reporters. And I thought it was really interesting that housing comprised just one of those 35 questions. And I shared this on LinkedIn. I said it's a humbling reminder for those of us in the housing and real estate business that as much as we obsess over Fed decisions, it's probably the you know, top one or two question I've been asked about in these last two years if I really know what's going to the Fed's going to do. Because I joke about this all the time. Even the Fed doesn't know what they can do. Their, their, their dot plot charts have proven to be very inaccurate and as they forecast future decisions. But we all think about it, we talk about it and, but when we see it's one of 35 questions, it's a, it's a humbling reminder that real estate is just a small piece of the many factors the Fed considers. So let's dive into that one question he answered. He was asked by a Barron's reporter about how high rates are exacerbating housing affordability issues. And he had a kind of a good answer here, a nuanced answer. And, and one thing he said, he clarified a comment he made from July and back then he said there's a long term housing shortage. This is not something the Fed can help with. And when he said that, I don't know if I share this in the podcast or on social media, but I'd been critical of that comment because I do think that Fed policy plays a role, the cost of debt plays a role in construction. We know that. But this time Chairman Powell spoke in more detail on the topic and gave us a little more nuance how he was thinking about it. He acknowledged that rate hikes does burden the housing industry and that Rate cuts will help supply. But then he also added, quote, most analysts think that it would have to be pretty big changes in rates to matter a lot for the housing sector. I think he's right. And then he said, quote, there's a deeper problem here that is not a cyclical problem that the Fed can address. And that is just. It is a me. Say it again. And that just is a pretty much nationwide housing shortage where a lot of places in the country just don't have enough housing for people, end quote. Now again, I'd been critical of his comment in July that the Fed policy couldn't address the housing shortage, but I see now what he was trying to say, that rate decisions do impact supply a lot. But he seems to be suggesting that no matter how much they cut rates, it wouldn't be sufficient to fully address the structural housing shortage, especially at the, you know, lower, most affordable ends of the market. And that does make sense. I agree with them on that. Now, as far as the impact to multifamily and BTR, I don't think anyone thinks a 25 bips cut is going to open up the floodgates by any means. Now the Fed also did signal 50 bips of cuts later this year that could be more impactful that signal. However, once again I'll point out the Fed has proven to be very bad at forecasting its own future decisions. You know, we all like to look at those dot plot surveys, but they're just not especially predictive, unfortunately. So barring much larger cuts, I think that quite obviously the big needle mover for apartment and BTR construction to get going again is not necessarily rates, but rents. You know, rents need to rebound first. I think developers and their equity and debt partners need to know, you know, what is today. We don't have a good understanding of what's that market rent going to be. You deliver because there's been too much high use of concessions, leasing challenges with high supply, it's taking longer to lease up. We need some stabilization first in occupancy, then rent to have a better understanding of what you're building to. And of course, friendly reminder, the 10 Year Treasury Matters a lot more for this industry and the federal funds rate, the two are obviously correlated over time, but they are different. And it's worth noting that the 10 year treasury is actually up since last week, ironically. And there are probably a lot of reasons for that. But you know, at the end of the day, I think there's just a lot of noise when you look at, you know, daily Movements in the treasury and the stock market as well. All right, next headline, huge deal. Kennedy Wilson to acquire Toll Brothers apartment living platform for $347 million. All right, so Toll Brothers, the big home builder, they are exiting the apartment business, selling its platform, including the leadership team and development pipeline sites to Kennedy Wilson. Institutional investor shifts $5.2 billion of assets under management to Kennedy Wilson. Now, according to their website, Toll Brothers Hartman Living only has two projects in active develop development right now. But they do a bunch in leasing all across the country. And they, and they really are coast to coast, northeast, Mid Atlantic to Sunbelt to west coast. They've got a Midwest presence as well. They do urban and suburban, also student housing. So they've dabbled in, you know, a lot of stuff, a lot of different markets and different product types. The deal includes Toll Brothers parton pipeline of 29 development sites as well as the in house development team. So that immediately makes Kennedy Wilson a major player in the apartment construction business and operating business as well. So many of you know, Lennar previously sold off a big apartment, a big portfolio of apartment homes under its Corterra brand. Now Toll Brothers is exiting apartments altogether. So what's going on? Well, you know, Toll, in their press release they said that they wanted to be more quote, asset light. Okay, so what does that mean? Well, remember that a typical new apartment project, you know, the institutional level apartment project, they kind of do. These are, these, these are projects that are worth easily 100 million plus. Okay, so it's a much higher, it's obviously much higher than building a typical single family house. And more debt and equity needed, more complex capital stack. More variables. I think very importantly more. There's more variables on when and how it gets sold compared to an individual house. So that locks up a lot of capital, sometimes longer than they may want. And that can have implications for a publicly traded company. You know, these big home builders are probably traded companies. And, and so, you know, if a big transaction worth 100 million plus gets delayed by one quarter, that, that could impact your quarterly results. So this sale gets told back to their core business. Now a related factoid I thought was kind of fun to share here. One of the Toll brothers is not out of the apartment business altogether. Bruce Toll runs a group called Bet Investments which builds and operates different types of real estate, including multifamily. And I'm not entirely sure why that was always separate, but I'm sure that he had his reasons. All right, next headline, this one comes from cnbc. More consumers are using rent payments to boost their credit score. Here's what to know and I'll read a little bit from this. It says the share of consumers whose rent payment are reported to credit bureaus rose to 13% in 2025, up from 11% in 2024, according to a new survey by TransUnion, one of the three major bureaus. Well, look, I mean if your rent is, is your largest expense now, wouldn't you want credit for paying it with the credit bureaus? So to me it's good to see more renters taking advantage. I think it's a win win. I think every property manager should be promoting the service because it not only helps with their customers, which are the renters, but I think it's good for the bottom line too. You know, it's in your own best interest. You know, I know some people say, well it's just positive outcome only, meaning we only report, you know, when payments are actually made, not when they're not. But even still it's an incentive to pay rent on time, pay on time, get credit for, for it. You know, it's a, it's a win, win. So I hope that continues to grow. All right, and we're going to go across the pond for our last headline of this week. It comes from BBC and the headline says I've sold my flat before the Renters Rights Bill becomes law. So in the uk, where they're nearing passage of what they call the Renters Bill of Rights, you know, I'll tell you these, everyone's always, they name these things so, so they're so well branded, it's kind of like, you know, good cause eviction. It's, it's, it's, it's deceptive what it actually is compared to the name and it doesn't necessarily have the impact that in long term that's supposed to have. And this is a very well named bill. But I think UK legislators are about to learn another lesson about the law of unintended consequences. So this bill would, according to the BBC, ban no fault evictions and allow tenants to challenge unfair rent increases, among other things. So first of all, a ban of no fault evictions, that sounds good, I think every renter would like that. But the real issue here is that the owner no longer has a right to control the property. The renter now effectively has many of the benefits of ownership, which includes security and semi permanence, but without the burdens and costs of ownership. Second, you know, can you imagine the Pandora's box of allowing tenants to Challenge, quote, unquote, unfair rent increases. So you know, what is unfair? Who gets to define it? What is fair to one side, maybe unfair to another side. So again, the property owner loses control of the property they own. And put it together, you know, in the US this might be what we call a taking at least, you know, violation the Constitution, at least more in theory than in practice, given what we've seen to happen in places like New York City. But, but here's the, here's the bottom line. It's no surprise to see a headline like this, an article about this, that property owners are selling their homes. You may not be able to sell later because the market to buy rental homes you can't control is going to go down. They're less liquid. Presumably you can't sell it to an owner occupant because I'd assume the renter in place could veto that as a no fault eviction unless there's a carve out for that scenario. So here's the unintended consequence. Rental property owners are selling their homes in the UK before the law goes into effect. And that means there'll be fewer rental homes on the market. Now if you're a buyer, you think, hey, that's a win. But who are the buyers? Well, they're generally wealthier people with more cash. It's a big loss though for renters, those who want to be or need to be renting who now have fewer options available to them, which means that their costs are only driven up more and their available housing is only driven down more. So the, the needy are impacted most negatively. So again, we got to, we got to think two and three steps down the line. We put policy together. For every action, there's an equal and opposite reaction. And the consequences here are just not that hard to figure out. We got to do a better job wherever we are in the world. We got to do a better job to really protect renters in need. This won't do it. It's going to inevitably backfire like we've seen from similar measures here in the U.S. all right, let's come back to rental housing trivia. The question this week was factoring all in monthly costs. When was the last time it was cheaper to be a new home buyer than an SFR renter in the US so I give you five choices. Was it 2002-2009-2012-2018 or 2021? The correct answer is drum roll E 2021. According to John Burns Research and Consulting, the last time this happened was in February of 2021. By March, the tables had turned. By 2022, it really soared as home prices and mortgage rates jumped. But interestingly, it was cheaper to be a new home buyer from June of 2019. So pre Covid all through 2020 into the first two months of 2021, the discount to buy versus rent peaked in July of 2020. $120 a month. That's a lot of 20s. Let me say it again. The discount to buy versus rent peaked In July 2020 at $120 a month. So five years later, let's compare that to July of 2025. It's now $881 more expensive per month to buy versus rent SFR when counting all in monthly costs. So certainly the tables have turned. And by the way, for apartment renters, it's about sixteen hundred dollars more per month to be to go be a home buyer. And that's going to take us to today's interview sponsored by funnel. The AI and CRM software are trusted by four of the six major REITs and many leading operators like BH and Cortland. To learn how Funnel can help your property centralize operations and automate everyday tasks, visit funnelle leasing.com Today's guest is a former investment banker and now the chief investment officer at Invitation Homes, Scott Eisen. Let's dive in. All right, now we enter the interview portion of today's podcast. And I am honored to welcome in the chief investment officer and executive vice president at Invitation Homes, Scott Eisen. So, Scott, thank you so much for being with us today.