Rental home investors poised to benefit as mortgage rates, high home prices sideline buyers in 2025

LOS ANGELES (AP) — Rental homes will remain an attractive option next year to would-be homebuyers sidelined by high mortgage rates and rising home prices, analysts say.

American Homes 4 Rent and Invitation Homes are two big real estate investment trusts poised to benefit from the trend, say analysts at Mizuho Securities USA and Raymond James & Associates.

Their outlooks boil down to a simple thesis: Many Americans will continue to have a difficult time finding a single-family home that they can afford to buy, which will make renting a house an attractive alternative.

It starts with mortgage rates. While the average rate on a 30-year mortgage fell to a two-year low of 6.08% in late September, it’s been mostly rising since then, echoing moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The yield, which has hovered around 4.4% this week, surged after the presidential election, reflecting expectations among investors that President-elect Donald Trump’s proposed economic policies may widen the federal deficit and crank up inflation.

Analysts at Raymond James and Associates say they see mortgage rates remaining “higher for longer,” given the outcome of the election. Last week, they reiterated their “Outperform” ratings on American Homes 4 Rent and Invitation Homes, noting “we are increasingly confident in the longer-term outlook for single-family rental fundamentals and the industry’s growth prospects.”

They also believe the two companies will continue to benefit from “outsized demographic demand for suburban homes," and the monthly payment gap between renting and owning a home, which they estimate can be as much as 30% less to rent.

Analysts at Mizuho also expect that homeownership affordability hurdles will maintain “a...