Invitation Homes Inc (INVH) — Q3 2025 Earnings Call Transcript

Welcome to the Invitation Homes Third Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Scott McLaughlin, Senior Vice President of Investor Relations. Please go ahead. Thank you, operator, and good morning. Joining me today from Invitation Homes are Dallas Tanner, our President and Chief Executive Officer; Tim Lobner, our Chief Operating Officer; Jon Olsen, our Chief Financial Officer; and Scott Eisen, our Chief Investment Officer. Following our prepared remarks, we'll open the line for questions from our covering sell-side analysts. During today's call, we may reference our third quarter 2025 earnings release and supplemental information. We issued this document yesterday afternoon after the market closed, and it is available on the Investor Relations section of our website at www.invh.com. Certain statements we make during our call may include forward-looking statements relating to the future performance of our business, financial results, liquidity and capital resources and other nonhistorical statements that are subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated. We describe some of these risks and uncertainties in our 2024 Annual Report on Form 10-K and other filings we make with the SEC from time to time. Except to the extent otherwise required by law, we do not update forward-looking statements and expressly disclaim any obligation to do so. We may also discuss certain non-GAAP financial measures during the call. You can find additional information regarding these non-GAAP measures, including reconciliations to the most comparable GAAP measures in yesterday's earnings release. With that, I'll now turn the call over to Dallas Tanner. Go ahead, Dallas.

Thank you, Scott, and good morning, everyone. I'll start by recognizing our exceptional teams across the country. Their dedication to our residents and to operational excellence continues to drive performance and reinforces our leadership in single-family rental housing. Stepping back, our business is built on a simple but powerful value proposition: choice, flexibility, and high-quality single-family living without the long-term financial and maintenance commitment of homeownership. That value proposition is resonating broadly from families seeking space and schools to professionals who value mobility. Today's housing dynamics continue to support steady demand for SFR. Even as mortgage rates move around, overall affordability remains stretched and transaction activity has been muted, partly because 70% of homeowners are still locked in at mortgage rates below 5%. For many households, the all-in monthly cost of owning a home, including mortgage, tax, insurance, and maintenance remain more expensive than leasing a comparable home. Based on the latest John Burns data weighted to our markets, those who choose to lease save an average of almost $900 per month compared to owning. Against that backdrop, our third-quarter results reflect the strength and the resilience of our platform. Demand remains consistent. And while new lease growth continues to be an opportunity, our renewal performance is outstanding. During the third quarter, we delivered same-store renewal rate growth of 4.5%, or 30 basis points higher than our third quarter result last year. At the same time, our average resident tenure further increased to 41 months, among the best in the industry. These outcomes speak to the stability, quality and location of our portfolio, the professional service we provide, and the value our customers place on staying with Invitation Homes. That stability gives us the confidence and flexibility to invest for the future, and it underpins our disciplined approach to growth. Today, we're pursuing channel-agnostic, location-specific growth focused on long-term total returns, primarily through the following four channels: First, our homebuilder partnerships that cultivate reliable and predictable forward purchases of full and partial new communities. Second, homebuilder month-end inventory or a list of homes shared by regional and national builders that we've carefully screened to identify those that meet our location and pricing criteria. Third, our construction lending program, which is gaining traction as a strategic way for us to deepen our relationships with smaller developers and facilitate the delivery of much needed new housing supply. And fourth, our third-party management business, which represents a capital-light way to leverage our platform and grow our scale and earnings. In the meantime, our capital allocation framework remains unchanged to fund organic growth, invest where long-term total returns are most compelling, and maintain a strong balance sheet so we're able to capitalize on opportunities when they arise. Naturally, we'll weigh the relative attractiveness of external growth, internal investment, and now share repurchases with a clear focus on long-term value creation. In summary, we remain confident in the durability of demand for well-located single-family rentals, in our ability to operate efficiently at scale, and in our capacity to grow prudently. Our markets continue to benefit from strong long-term fundamentals supported by healthy demographics and sustained desirability. Even if lower mortgage rates become more prevalent, we believe that will be a strong positive for our business as greater liquidity and transaction volumes should benefit the housing market broadly, and we're well positioned to perform and capture opportunity across these cycles. Before I hand it over to Tim, one last note. We'll be hosting our Investor Day and Analyst Day on November 17. This event will provide a deeper look into our strategy, growth initiatives, and our long-term outlook. Look for the live stream webcast details to be shared on our website about a week or so prior to the event. With that, I'll pass the call over to Tim Lobner, our Chief Operating Officer.

Thank you, Dallas, and good morning, everyone. I'm pleased to walk through our third-quarter operating results, including our same-store renewal and leasing performance as well as our controllable expense management. But before I do that, I want to recognize the strength of our portfolio, the exceptional execution of our associates across every market we serve and, most importantly, the trust and loyalty of our residents. Their confidence in Invitation Homes is what allows us to deliver on our mission every day. Together, these relationships and efforts form the foundation of our success. Since this is my first earnings call speaking with you directly, I'd also like to share a few thoughts on the road ahead. The current landscape brings both opportunities and challenges, which I see as a proving ground for our team and the vision I have for leading it. That vision is rooted in relentless execution, operational excellence, and a customer-centric mindset. We will pursue every opportunity, engage every prospect, and deliver service that sets the standard in our industry. Through disciplined oversight, accountability, and a culture of hard work, we'll continue to drive strong results, and I look forward to sharing more on that at our Investor Day on November 17. The commitment I just mentioned is already beginning to show in our performance. In a dynamic operating environment, our teams continue to deliver solid same-store results. This included third-quarter average occupancy of 96.5%, consistent with our expectations. In addition, our renewal business, which accounts for over 75% of our book, continued to be a reliable source of strength, demonstrating both the durability of our model and the value residents place on the product and service we provide. We achieved renewal rent growth of 4.5% in the third quarter, underscoring our pricing power with existing residents and reinforcing the quality and appeal of our homes. Shifting to the new lease side of our business, as expected, third-quarter new lease rent growth was slightly negative, driven by elevated supply in select markets that is amplifying typical seasonal patterns. Taken together, blended rent growth for the quarter was 3%. Looking more broadly at the components of same-store core revenue growth, we saw solid contributions across key areas. Other property income grew 7.7%, driven by continued adoption of value-add services that our residents desire, such as our Internet bundle, our Smart Home features, and other resident offerings. In addition, bad debt improved by 20 basis points year-over-year, reflecting the quality of our resident base and the sustained rigor of our screening and collection processes. Together, these factors contributed to core revenue growth of 2.3% for the quarter. On the expense side, our teams continue to manage costs effectively while maintaining high service standards. Same-store core expenses increased 4.9% year-over-year, with fixed expense growth showing some welcome moderation this year compared to recent years. The overall result was same-store NOI growth of 1.1% for the third quarter, which is typically our most modest growth period due to elevated seasonal turnover and other transitory factors. Turning to October, our preliminary same-store results were generally in line with expectations. New lease rates were down 2.9% year-over-year, reflecting the impact of targeted specials we ran to drive traffic and strengthen occupancy, which averaged approximately 96% in October. Importantly, October renewal spreads remained strong at 4.3%, supporting blended rent growth of 2.3% for the month. That represents a notable acceleration in blended lease spreads of 20 basis points compared to this time last year. To close, I want to once again thank our associates for their continued focus and commitment. Their efforts have helped to enable our growth while ensuring that our residents feel safe, supported, and at home. We have the right team in place to finish the year strong and continue executing on our strategic priorities. With that, I'll turn the call over to Jon Olsen, our Chief Financial Officer.

Thanks, Tim. Today, I'll provide an update on our strong balance sheet position, recent capital markets activities, and third-quarter financial performance. I'll then wrap up with an update on our full year guidance revisions outlined in yesterday's earnings release. We ended the quarter with total available liquidity of $1.9 billion, which combines unrestricted cash on hand with the undrawn capacity on our revolving credit facility. This substantial liquidity position provides us with the financial capacity and flexibility to pursue growth opportunities, manage operations, and navigate market volatility with confidence. In addition, our debt structure continues to reflect the high-quality investment-grade profile we've worked diligently to build. As we've discussed in the past, over 83% of our debt is unsecured, over 95% of our debt is either fixed rate or swapped to fixed rate, and approximately 90% of our wholly owned homes are unencumbered. We have a well-laddered maturity profile with no debt reaching final maturity prior to 2027, and our net debt-to-EBITDA ratio was 5.2x at quarter end. Combined, these attributes provide meaningful cushion for both operational flexibility and future growth investments. A highlight of our third-quarter capital markets activity was the successful completion of a $600 million bond offering in August. The unsecured notes mature in January 2033 and have a coupon of 4.95%, which represents an attractive long-term cost of funds. The deal also extends our maturity profile and frees up capacity on our revolving credit facility. The offering received a strong reception from investors, reflecting the market's confidence in our credit quality and business fundamentals. Also included in yesterday's earnings release was our announcement that our Board of Directors has authorized a share repurchase program of up to $500 million. We view this as a tool that is part of our disciplined capital allocation plan and an ordinary course approach to enhancing shareholder value. Turning now to our third-quarter financial results. For the third quarter of 2025, we delivered core FFO per share of $0.47 and AFFO per share of $0.38. Tim already covered our third-quarter same-store results, but I want to provide a bit more detail on two items. First, property taxes were up 6.3% year-over-year in the quarter, largely due to the benefit we realized this time last year from favorable developments in Florida and Georgia. This year, bills from those two states, which together represent more than half of our property tax expense, have so far come in slightly better than expected. Second, we received a favorable premium adjustment related to what is effectively a rebate structure built into our insurance program. This contributed to a 21.1% decrease in insurance expense year-over-year. As a result of our year-to-date performance, we are raising our full year 2025 guidance. We have increased the midpoints for core FFO and AFFO by $0.01 each to $1.92 per share and $1.62 per share, respectively. Additionally, we have raised our same-store NOI growth expectations by 25 basis points at the midpoint, now 2.25%. This was comprised of narrowed core revenue growth guidance in the range of 2% to 3% and improved core expense growth guidance in the range of 2% to 3.5%. Further details of our revised guidance are included in yesterday's earnings release. As we near the end of the year, I want to acknowledge the great progress we've made in the first 10 months. These achievements are a testament to the hard work and discipline of our associates, and I'm thankful for what we've accomplished in a dynamic operating environment. That said, we know we need to remain focused and agile as we approach the remainder of the year, and I have every confidence we'll deliver on that front. This concludes our prepared remarks. Operator, please open the line for questions.

Congrats on a great quarter. I was wondering if you could spend a little time talking about your supply outlook for 2026 with both kind of the BTR deliveries that are expected to deliver next year relative to this year? And then also how you kind of think about that more shadow supply of whether it's an owner-occupied household or becomes a renter household.

Thanks, Jana, for the question. This is Dallas. We've been observing the supply situation, and it can be categorized into a few different areas. First, as we mentioned during our third-quarter call last fall, the BTR delivery we've started seeing in our markets has created some noise on the supply side. Secondly, there's a small percentage of for-sale products that may not be moving in the market and could convert to single-family rentals. Lastly, we are keeping an eye on the supply levels and scale among professional operators competing in similar markets. Overall, it's been varied by market, but what we've experienced this year has mostly aligned with our expectations from the beginning of the year. We anticipated an increase in new leases as we moved through peak leasing season into summer, but expected some softness towards the end of summer due to limited homeowner activity and the shadow supply we referred to last year. On a positive note, markets like Florida and Atlanta are seeing their supply and delivery schedules improve. However, we remain cautious about the single-family rental market and will continue to monitor the supply situation. We are encouraged by the signs from builder partners, but we may still experience a few more quarters of heightened supply, particularly in some Sunbelt markets, as we've noted in previous quarters.

I think you said in your remarks that October was like 96% occupancy, which I think is kind of down sort of 50 basis points from the third quarter. And then you gave the new lease down, I think, 2.9% and renewals 4.3%. I guess what I'm sort of putting that all together, I guess it's a little bit tough for me to get to that sort of fourth-quarter number that you need to hit guidance. And so I didn't know if there's something in the fourth quarter like lower bad debt or improving fees or something that gets you to that sort of positive sequential growth to hit the midpoint. And apologies if I'm just missing something on those numbers. Those are just what I've heard from the remarks.

This is Tim. Thanks for the question. Look, the occupancy dip that you referenced down in the 96.5% range, that was expected. If you recall, going back to the beginning of the year, we talked about that we'd be taking a more measured approach. We anticipated that occupancy would come in a bit as the year progressed, get to a healthy level in the mid-96% range, which it has. We also anticipated that the new supply would create some pressure on new lease growth, which it also has. The good news is, as you look at the fourth quarter, our renewal book of business, which accounts for about 75% of the book, is super healthy. Our Q3 renewal rates grew to 4.5% year-over-year, about 30 basis points higher than the same period in 2024. October, as you pointed out, renewal rate was 4.3%. That's an important part of the Invitation Homes story. Our customer is very healthy from a financial standpoint, pleased with the Invitation Homes leasing experience. They're staying for 41 months. I think that's the most important thing to point out as we head into Q4. Remember, Q4, you don't see a lot of people leaving. Turnover tends to be low. And so we feel like we're in a really healthy spot, and the year is progressing as expected.

This is Ami, on with Michael. I was wondering, do tenants tend to look to negotiate more on renewals and assets in BTR communities where they can see competitive pricing on units and really have a market comparison?

Thank you for the question. The consumer does negotiate on renewal and is aware of the open market. We also negotiate as necessary to maintain our occupancy targets. Therefore, we don't observe a difference between build-to-rent and our same-store scattered site portfolio. Consumers generally behave similarly across different asset types within the portfolio.

Dallas, there's been a lot of rhetoric out of Washington between the Trump administration, Bill Pulte, just about trying to bring down house prices and make things more affordable. I'm just curious, what are you hearing in your discussions with the homebuilders? How do you think this might impact your business, either good or bad?

Interesting question, Steve, and it's one that we've had in kind of a couple of different ways. Let me just take a step back. Speaking broadly to the homebuilders, and we've obviously paid attention to some of their calls over the last week or two, they're certainly seeing a little bit of softening demand, it sounds like. Now it sounds like they're managing inventory a little bit better as well. Yet some of these guys have done a really nice job of leaning out and trying to put more production into the market in 2025 specifically. And they've talked about that as they put that production out, they've actually had a lower pricing because the bid-ask spread had been a little wide. In our one-on-ones, which I always want to protect and be careful about talking about what anybody says, it feels like they're hearing the message that from a federal perspective, they'd like to see a bit more production. I think that being said, if we're being fair, there's plenty of supply in the marketplace right now. I think for-sale listings are up over 1 million units this year. The challenge is on an annualized basis, we're only seeing something like 4 million to 4.5 million sales nationally. And that just doesn't work. Like we need to get back to a place where we're seeing 5 million to 5.5 million sales a year in this country. And I think a lot of that has to do more with the liquidity around mortgage and mortgage rate. There's still something like 70% of mortgage holders in the U.S. are at 5% or better. 80% are at 6% or better. So that spread back to our earlier comments around the total cost to own versus the total cost to lease is still really wide. I think that's why we're seeing the pickup in our renewals business is one example of why in a year where maybe there is actually more product on the market, we're actually renewing at a higher rental rate than we were at the same time last year. And I think it's indicative of the fact that if you have location already solved, you're not looking to absorb future costs right now. And so I think I would expect that the builders are probably weighing that out as well. And we've certainly seen that, and Scott can talk more about this later in some of the opportunities we've seen over the last couple of quarters. There's been some really good opportunities on newer product because inventory is sitting.

Dallas, I wanted to ask a question on capital allocation. I guess, first, maybe can you talk about the increase in the acquisition guide? I'm assuming that's coming from your builder relationships and some of the dynamics you're talking about earlier. But I'm also curious on the yields you're seeing there and how that compares to stock buybacks. I think a lot of us were hoping or maybe expecting to see you act on buying back the stock a bit sooner.

Thanks, Haendel, for the question. First and foremost, on our capital allocation through, call it, the first half of this year, we've had many things in flight from a delivery perspective that were part of our BTR programming that are just ordinary course and they're kind of built into our thinking. There's been a little bit of more opportunistic buying. Scott can give some color on this when I finish here around things that we've seen in the last 1.5 quarters or so in some of these end-of-month, end-of-quarter, end-of-cycle opportunities with some of our both regional and national builders. In terms of stock buyback, look, this is something we started to think about this summer going into our fall Board meeting, and it was one of the items that we put together to talk about with our Board that we wanted to be in a position that if the volatility was going to exist in the stock price that if or when appropriate and on a measured kind of basis, as we think about how to use our capital, capital allocation, and disposition proceeds, we certainly want to have this be one of the tools in our toolbelt if stock price is going to kind of stay in these ranges for some period of time. So we'll obviously look for opportunities to use it. We just hadn't had the plan in place. We never set one up. So we're in a good spot now. We feel like it's an added tool to the toolbelt, and we'll use it appropriately and in discussion with our Board.

Scott, anything to add on deliveries? No. I think the only other thing I would address, Haendel, is that when you look at our acquisitions for the quarter, probably about 70% of it was, as Dallas said, forward purchase deliveries where we're sort of on the back half of community deliveries that we started in last year, and we're getting towards the tail end of that. And about 30% or so of what we did this quarter was really opportunistically buying homes on a one-off basis from the homebuilders off their tapes. I think it's been widely reported that the homebuilders have had a lot of inventory, and they've been trying to sell homes, have deliveries in 30 days. And so I think for us, it's been a great opportunistic way for us not only to pick up homes at 20-plus percent discounts to market value, but also get a home for almost immediate delivery that we can put into the market and hopefully get leased within 60, 90 days. So I think we feel good about what we've done, and we've been smart and opportunistic, I think, about where we've allocated.

Just going back to an earlier question, you guys affirmed the same-store revenue guidance, but you did keep a wider range late in the year. So I guess despite kind of, Tim, your comments on trends being largely as expected, why not tighten the range this late in the year? And then also curious, are you continuing to offer similar concessions that you referenced in October to hold that occupancy at 96%?

Thanks for the question. It's Jon. I'll chat briefly about the revenue range. Just to be clear, we did tighten that range. I think if it strikes you as particularly wide late in the year, I would just point out that this is sort of a dynamic environment, and we want to be mindful of that. We continue to feel good about the way the year is shaping up. And I would remind folks that really from the first part of the year, we've been talking about rate and occupancy in terms of our overall expectations for 2025. In the first part of the year, I think repeatedly, we said we were running a little bit ahead of where we expected to be. And I think what we're seeing is that results are sort of aligning around what our full-year expectations were. And so still feel very good about our full-year occupancy guide. I think with respect to some of the other items, time will tell. We feel good about where we're coming in from a tax perspective. Recall, our original range was 5% to 6%. We expect we'll be around the bottom end of that range and hopefully do a little bit better than we anticipated with respect to insurance expense and some of the controllables. But I think from a revenue perspective, we want to be mindful of the fact that this is an environment where we have to be nimble, and we have to really pursue every lead, every opportunity because it's just a little bit softer than it's been.

Anything you want to...

Yes. Thanks, Jon. Yes, I can touch on the specials. Look, on the specials that we're offering, we typically run targeted specials in October and November. It's a great tool in the toolbox. Our goal when we present these to the market is to boost traffic and generate leasing momentum ahead of the holiday season when the market tends to slow down a little bit. We're pleased with the results we're seeing, and we'll continue to evaluate the need to keep those in place.

Another one on the repurchase. Do you see that as an attractive use of capital as we sit here today? And then can you talk through what the governor on that activity is? I would think using dispositions to fund it might get complicated just because homes have appreciated so much, but is that an issue? And is there anything else you would call out on the philosophy there?

The main point to remember is that we are still bound by the same blackout periods as before. Regarding the current pricing in the market, there are certainly moments when having extra capital allows us to consider opportunities like a share buyback. However, I cannot predict exactly what we will do. It's important to note that there is often a gap between market expectations and what can realistically be achieved, especially when taking into account deliveries, cost of capital, and other business factors. We will approach any decisions carefully and strategically, working closely with our Board of Investments and Finance Committee, especially as we move towards the end of the year.

Great. I guess kind of sticking with some policy questions here. What do you think the impacts have been on immigration policy changes in your markets, whether it's on construction costs with labor or overall demand? And are you seeing any difference across different regions or markets?

Look, I'll handle the first part on the immigration. We've asked the same question of homebuilders, and we paid attention to some of the commentary. I mean look, it has to have some effect, right? I mean we're not seeing anything from an occupancy perspective. We're sort of in the sweet spot of our range, as Jon and Tim mentioned. Our expectations going into the year were that we had run kind of in the low to mid-97s as an average occupancy in '24. We just knew that wasn't sustainable. It was going to kind of come into the kind of the mid-96s. We're not seeing anything in terms of lead volume or customer profile. In fact, our FICO scores are basically in the same range they've been for several quarters in a row. As far as what we're seeing with labor costs and land costs and input costs, Scott, do you want to provide a little color there?

Yes. I mean for a broader question, Jamie, I think as it relates to what we're seeing on construction costs with the homebuilders, I think so far, so good. I think finished lot prices have kind of slowed down their rising pricing. And I think there's been a decline in lot buying by the builders. I think construction costs have moderated and are generally under control. I think the data we've seen says that maybe there's a little bit of a labor cost rising in terms of the total production for homes. But I think in general, like in terms of the purchase prices that we're seeing and the construction costs that the homebuilders are passing on us, I think we're seeing it kind of in line with what we expected and in a pretty decent place.

Curious what you're seeing from a front-end demand perspective that gives you confidence that the headwind from a pricing power perspective is supply related and not demand related. Maybe some commentary surrounding the reception to the new move-in specials or any other way that you quantify demand would be great.

Yes. Great question. This is Tim here. Look, on the demand side, we are continuing to see a healthy demand for single-family homes. Our website traffic remains very consistent. Obviously, there's more product out on the market, as Dallas talked about earlier, the couple of different channels that have produced that supply. So that demand is being spread across more homes on the market. But look, we like our position. The Invitation Homes promise is a good one. We try to differentiate our brand through our ProCare, through our value-add services. So we think we're going to still capture our fair share of the marketplace. So obviously, heading into the fourth quarter, demand does go down a little bit, but that's a seasonal component, but we like our position as we head into the end of the year.

Just a question on the loss to lease. Where do you see that presently? And then kind of a Part B turnover, it seems to finally be kind of inching up. Do you think we've kind of bottomed out there? And do you expect to see more turnover going forward given some of the competing factors both on the supply and demand side?

Thanks for the question, Juan. Regarding loss to lease, I would say it's in the low to mid-single digits. It's important to remember that loss to lease is not uniform across every home and market. You can group homes that have different levels of loss to lease. Over time, as we expect around 70% to 75% of those to renew, you will maximize what you can, but the loss to lease number in relation to what we achieve depends on several variables. Could you remind me of the second part of your question, Juan?

Turnover and how you guys think about that going forward?

Yes. Thank you. I mean, I think turnover obviously, is certainly seasonal. We expect to see turnover pick up in the second and third quarters and then moderate in the first and fourth. Do expect that turnover will return to something closer to a long-term average, kind of closer to 25% than the 22% that we were seeing. But we continue to see a high propensity to renew. We continue to see the affordability gap really drive demand for single-family rental product. and feel good that even at a somewhat higher level of turnover going forward, this is a really, really sticky customer. They appreciate the product and the service that we deliver, and they continue to stay with us longer and longer. So we feel really good about the setup and think that single-family rentals, in particular, are well positioned in the residential market.

Maybe a little bit of a higher level, bigger picture one. I think our view has been that the apartments have underperformed of late. I think a lot of that has been driven by sort of slowing job growth and concerns around the job growth from here. I think our view has been that SFR should be a little bit more insulated from that, right, given, I think, some demographic reasons. Wondering sort of when you guys think about your own business, how you sort of think about the demand drivers? Obviously, there's the housing market and sort of what's happening there on the for-sale side. But when you think about job growth and sort of the path forward, there, how much do you think that sort of matters or doesn't matter for your business? And as we look to next year, I guess, sort of how would you think about demand next year maybe versus what you've had this year?

It's challenging to accurately predict the future when looking that far ahead. However, as we approached this year, we felt very assured that we could achieve renewal rates around 75% to 77% with our current customers, and there is nothing indicating that this will change going into next year. It appears that our renewal rates are aligning with our expectations. I’ll be cautious about providing guidance, as Jon would prefer I wait until our February call. Nevertheless, we're not observing any decline in our customer base. Tim mentioned the incoming leads, which remain quite robust. Our success in converting these leads has actually improved relative to our usual performance, and our collections have also surpassed historical figures. The current customer profile does not suggest any major changes are imminent. The one variable we're continuously assessing is the new lease supply challenge, which is the only aspect that has proven difficult to predict accurately. This is largely contingent on the overall performance of the housing market. Ideally, we would like to see an increase in home sales, as the transaction volume serves as a good indicator of home price appreciation and rent growth for the future. We will maintain our efficiency in managing operations. Jon has mentioned that there are no issues there. Our FICO scores from incoming customers look excellent, and our collections and bad debt are right where we hoped they would be. We will continue to focus on the opportunities ahead related to new leases and supply issues. Beyond that, the business is performing largely as we anticipated.

I have a quick question regarding the performance in the non-same-store pool. Could you provide some context about the 2023 and 2024 acquisitions and how their NOI has performed compared to your initial projections?

Yes, Jon, I'm probably going to have to come back to you with more of that detail as a follow-up. But I would say that homes that we bought in kind of the '22, '23 time frame were basically sort of when the market had the most froth and when underwriting was arguably more likely to anticipate continued strong rent growth. So I think that vintage of homes probably has a little more wood to chop to get itself in line from a margin perspective. But we feel really good about the product we have bought. We feel really good about the way we are approaching investing in this marketplace. I think right now, it's just a function, as Dallas said, of getting this new supply absorbed and hopefully seeing the resale market get to a healthier, more liquid place.

Dallas, I wonder what you make of the current public versus private market valuation disconnect reflected in your stock today? And maybe to an earlier question on capital allocation. Do you feel like just executing your strategy and starting to be aggressive on the share repurchase front can sort of help narrow that? Or at some point, are there sort of additional strategic options you and the Board sort of start to look at to drive shareholder value?

Thank you for the question. On the strategic side, we plan to keep our discussions internal. However, I can say that our strategy of selling homes at a cap rate between 4% and 4.5% and reinvesting either in share buybacks or new acquisitions with cap rates around 6% and strong revenue growth potential remains an effective way to enhance shareholder value. Like many in the residential sector, we are frustrated with the disconnect between public and private valuations. The current environment is challenging, especially with REIT outflows and the impact of technology on S&P performance. We are observing that private transactions are trading at significantly lower implied cap rates compared to public market valuations. Our experience in real estate has taught us that there are cycles, and sometimes public market behavior can appear illogical. We will continue to focus on meaningful capital recycling and will seek other opportunities as they arise.

Just a quick clarifying question. Dallas, I want to go back to the sort of the different buckets of potential competitive supply you referenced earlier on the call. And I think last quarter, the forecast is for BTR specifically to drop pretty significantly in 2026. And so I'm just kind of piecing that together with what you said earlier. So does that imply that those other buckets that are sort of the non-BTR would be maybe bigger question marks or growing at a more rapid rate? Just help us understand maybe some of the dynamics there.

Yes, that's a good question. Regarding the supply situation, there isn't any indication that we're seeing an increase in supply. In fact, as I mentioned earlier, there are some markets where we are cautiously optimistic. I don't want to say we've hit the bottom yet, but we are noticing positive signs in Florida. However, in places like Phoenix, it remains challenging for new leases due to higher inventory levels. These are the markets where we have significant exposure, so we focus heavily on analyzing these areas and examining three main aspects: what we're observing in build-to-rent (BTR). Notably, we've experienced improved leasing activity in our own BTR business, suggesting an uptick in demand, which has been beneficial. We've worked closely with our partners and analyzed data to better understand the listing environment and how much of that might be homeowners transitioning to rental leases. This trend tends to increase during the summer, although we anticipate a slowdown as we move into Q4 and Q1, as John pointed out. Overall, the market appears to have stabilized at our anticipated levels, but it remains more competitive for vacant properties in these areas as we vie for customers. To succeed, we must be efficient and price competitively. As Tim noted, there are times, especially in typical markets like October and November, when we need to adopt a slightly more aggressive approach. Therefore, our current strategy is to be proactive and avoid letting properties linger on the market for an extra three to four weeks; we might take a more assertive stance to lease them during Q4.

Just to touch on geographies. It'd be helpful to hear if there are any markets that you were surprised with either their outperformance or underperformance relative to your expectations.

It's an interesting question, and we likely have various perspectives on different aspects of our business. Generally, I must commend our team, particularly Costa, as they have done an excellent job managing turnover and costs, as well as our expenses. On the renewal front, we've been quite satisfied with what we've observed, especially in markets like Miami. Some areas in Florida continue to show strong performance in renewals, although the new lease side may tell a different story. Atlanta has also remained a solid market. Throughout our recent calls, we've noted that Chicago and Minneapolis have been outperforming for the last four to six quarters. While it's uncertain how long this trend can continue in the Midwest, it has been a positive highlight for us over the past year and a half, especially since those markets have experienced no new supply for the last decade, as reflected in some of the data.

Thank you, guys, for joining us today. We're looking forward to seeing many of you at our upcoming Investor Day and looking forward to sharing more of our story broadly through the webcast. Thanks for all your support and for listening. We'll see you soon.