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“There isn’t enough housing in this country to meet the current demand": Invitation Homes CEO

Dallas Tanner, CEO of Invitation Homes, joined Yahoo Finance Live to discuss the state of the housing market and the impact COVID-19 has had on the housing sector.

Video Transcript

SEANA SMITH: Let's turn to the real-estate sector because it has been an outperformer in this economy that has struggled during the pandemic. So here to talk a little bit more about the dynamics at play in real estate right now, we want to bring in Dallas Tanner. He's the CEO of Invitation Homes. And, Dallas, it's great to have you on the program.

Invitation Homes, it's the country's largest rental-home owner, so you have a pretty good vantage point just in terms of what is at play and what is going on in the market right now. What kind of demand are you seeing for your properties at this point?

DALLAS TANNER: Well, demand has been really healthy. I mean, today our occupancy sits far north of-- close to almost 98%, and that's up nearly, you know, 200 basis points year over year. We're seeing a tremendous amount of interest in any properties that we have available, and most of our residents are choosing to renew. On a year-over-year basis, our turnover is down and our retention rates has been as high as almost 75%. So things feel really, really healthy.

ADAM SHAPIRO: Dallas, I think you're probably sitting on a gold mine, but I'm trying to figure out why the stock market today and year to date is kind of keeping you flat. I mean, you're down a little bit year to date. And I would think, again, you're in the catbird seat, as they would say in the Midwest.

DALLAS TANNER: Yeah, we're fortunate. I mean, we've been in-- we're in a business that's very resilient. And from a cyclical perspective, we've continued to outperform, and we've weathered the pandemic, you know, fairly well while making sure that we assist residents that have been in need. We've been restructuring and reworking lease structures for those that have been impacted by the pandemic.

But I think you're right, and I think that's one of the tricky things about the public markets is that sometimes it doesn't always make sense. I think it's up to us to make sure that we continue to operate with excellence, that we continue to drive, you know, best practices in and around our business, and I think the results are speaking for themselves.

SEANA SMITH: And, Dallas, coming off of that, I mean, it's interesting just when we see just the struggle out there. I guess 1 in 12 renters was the latest statistic that I just saw that are either missed, delayed, or made a reduced payment in September. And this is according to the Mortgage Bankers Association. What do you seeing just from your renters just in terms of-- you mentioned the fact that some are struggling at this point. How are you helping them then?

DALLAS TANNER: Yeah, there's a couple of things we've been able to do. And, you know, we're fortunate in that we've been in a position where we can help, and I think that's, you know, really an important responsibility that all landlords share in that regard. And, you know, we've been able to restructure. We've been able to modify structures for families that have proven hardship. We've been following all the government guidelines, both at the federal level and also at the state level, to make sure that nobody is being missed.

And I think, you know, most importantly that, you know, within our business, we have a little bit higher property profile and a renter that, quite frankly, is choosing to lease more so than choosing to buy. And so that flexibility gives us a cohort of people that are looking for flexibility, and they want some of the ancillary services that our business offers as part of that living experience. So it's more of an elective choice than maybe a choice out of need.

ADAM SHAPIRO: What opportunity, if any, do you see-- and it wouldn't be your traditional single-family standalone home. But in places like New York, Chicago, the big cities where values are now dropping as people leave-- and I don't wish on anybody having to go through a New York City real-estate deal. But there's going to be opportunity to acquire here and then maybe turn around and flip as rental properties or not.

DALLAS TANNER: That's a great question. I mean, certainly there have been parts of the country that have been hit harder related to the pandemic than others. Our portfolio is primarily coastal and sunbelt markets, which tend to see much more household formation than probably parts of the Midwest or the Northeast. So we have a tremendous amount of demand for that product, and I don't believe that a lot of these markets are going to experience that kind of pain.

I think that's for a couple of reasons. One, I think the government's stepped in and done some nice things around forbearance, which is giving families, particularly on the ownership side, better flexibility. And there will be, you know, also a secondary part of that story which didn't exist in 2008 in the last housing crisis, which is people have a lot of equity in their properties today. And so I think that will give flexibility for lenders and originators or servicers to help create, you know, modifications and structures that make sense for both parties.

There will certainly be a few pockets in the country where we may start to see or experience more frictional pain in terms of housing prices and things like that. But taking a step back, we are undersupplied in this country by a pretty large percentage, somewhere between a million two million units undersupplied. So when you take a step back and think about the macro fundamentals, there's really actually a tremendous amount of demand for product like single-family homes for lease, like single-family ownership.

And so I don't believe we're going to solve that problem in the near term even with some markets experiencing maybe a little bit of drag due to the pandemic. There's still plenty of people that are looking to buy homes, plenty of people that want to lease homes. And interest rates are at historic lows, and we don't see that changing in the near future.

SEANA SMITH: Do you at all see that changing with a vaccine? We got the Moderna and Pfizer news out, Moderna this morning, Pfizer last week. Any thought that that could ease some of the demand, at least for suburban rentals?

DALLAS TANNER: I believe we're going to have a tremendous amount of demand with or without a vaccine because people want quality housing, and that's not a punch line. That's just the facts. There isn't enough housing in this country to meet the current demand.

I believe that any news coming from vaccine origination or that companies are getting closer to distribute is only a net positive for a couple of reasons. One, it'll lift consumer confidence and maybe encourage those that are waiting on the sidelines to buy to get into the marketplace, which will have a reciprocal effect on housing prices and also the stability of those prices within a community.

And then the second piece of it to your point is it may actually create additional transaction volume because a lot more people are probably staying put right now, and that may be that way for the foreseeable future, at least for the next year or two. But I think as consumer confidence comes back, as people feel safe, I think we'll start to see more of that transaction volume, which will just add to an already very healthy housing environment.

ADAM SHAPIRO: I think Seana may have touched on this at the beginning, but I missed the response. Where's the hottest markets right now for rental? Is it the South or is it in the Northeast? Where is it?

DALLAS TANNER: Southwest and the Southeast are extremely healthy. You have markets like Phoenix and Denver-- you know, if you look at our business, for example, today, we have half a dozen markets over 98% occupancy, which is just super healthy fundamentals when you're trying to run a business where you can create quality housing for folks.

The other side of it is that builders, as you guys follow, are doing really well, and they're seeing their inventory levels shrink of what they have available. And as you take a step back, you think about the resale environment. In most of these Southwest and Southeastern markets, there's less than 2 and 1/2 months of available supply. Most economists would have told you historically six months was a healthy level of supply to have in a market at a given time. Today, that's just not the case, and I'm not sure we're going to see those kind of numbers for some period of time.

SEANA SMITH: All right, Dallas Tanner, CEO of Invitation Homes, we really appreciate you taking the time. Thanks so much for joining us.

DALLAS TANNER: Thank you for having me.