Investors seeking exposure to the property market often turn to real estate companies, allowing them to participate in real estate gains with a lower initial investment. However, recent analyst ratings reflect a mixed outlook for this sector.
Camden Property Trust
has been downgraded from ‘Outperform’ to ‘Sector Perform’ by RBC Capital Markets analyst Brad Heffern, who maintained a price target of $122. While Camden Property Trust reported strong July quarter results, Heffern attributes this primarily to the peak leasing season rather than fundamental improvements. He anticipates the company to miss its guidance for the latter half of 2024, citing potential headwinds in the Sun Belt region. Heffern notes that while supply constraints are easing, a potential demand problem might emerge if homebuyers return to the market as mortgage rates decline, leading to increased tenant move-outs.Invitation Homes
also saw its rating downgraded by Heffern from ‘Outperform’ to ‘Sector Perform’, with a lowered price target from $37 to $36. Heffern points to a deceleration in leasing spreads and tenant resistance to higher rental rates in the third quarter. He suggests that affordability improvements in the for-sale housing market could further challenge Invitation Homes’ performance due to the higher average income of its tenants, making homeownership a more attractive option.However, there’s positive news for
LGI Homes
, which has been upgraded from ‘Underperform’ to ‘Neutral’ by Wedbush analyst Jay McCanless, who raised the price target from $97 to $125. McCanless highlights LGI Homes’ strong August sales performance, with the highest absorption rate since December 2023. The company is on track to meet its third-quarter closing forecast, fueled by steady declines in mortgage rates and the recent pullback in share price. McCanless anticipates a shift from net cash outflow to inflow in the latter part of 2024 and early 2025.Stock Performance:
* Camden Property Trust shares closed down by 0.29% at $121.84.
* Invitation Homes shares experienced a 1.17% decline, closing at $35.54.
* LGI Homes shares surged by 2.14%, closing at $107.04.
