03:57 PM EDT, 09/09/2024 (MT Newswires) -- Invitation Homes ( INVH ) leasing spreads for Q3 are slowing down, and renewal negotiations indicate tenants are resisting rate hikes more, RBC Capital Markets said in a note Monday.

Invitation Homes ( INVH ) reported blended lease rate growth of 3.7% for July and August, down from a peak 5.4% in May, and the lowest since January, at a time when historically demand and spreads are higher, RBC said.

With mortgage rates dropping, the for-sale housing market could pose a challenge, especially since Invitation Homes' ( INVH ) tenants, with their higher average income, are more likely to buy homes, RBC said.

"We continue to think 2025 consensus estimates are too high, especially with headwinds from Invitation Homes' ( INVH ) swaps rolling off, and while valuation looks more modest on 2024 numbers, it is not compelling on 2025."

If mortgage rates remain high, the expected housing headwind might not materialize, though above-average pricing power seems unlikely. Conversely, a faster Fed rate cut could reduce the impact of expiring swaps if Secured Overnight Financing Rate drops, according to the note.

RBC downgraded Invitation Homes ( INVH ) to sector perform from outperform and lowered price target to $36 from $37.

Price: 35.85, Change: -0.11, Percent Change: -0.29