L
OS ANGELES — Rental homes are expected to remain a viable option for Americans struggling with high mortgage rates and rising home prices next year. Analysts at Mizuho Securities USA and Raymond James & Associates predict that American Homes 4 Rent and Invitation Homes will benefit from this trend, citing the difficulty many Americans face in affording single-family homes.

    Mortgage rates have been on the rise since September, when they dipped to a two-year low of 6.08%. The 10-year Treasury yield, which lenders use as a guide for pricing home loans, has also increased, reflecting investor expectations that President-elect Donald Trump's economic policies may widen the federal deficit and boost inflation.

    Analysts at Raymond James expect mortgage rates to remain higher than usual due to the election outcome. They maintain "Outperform" ratings on American Homes 4 Rent and Invitation Homes, citing strong demand for suburban homes and a significant monthly payment gap between renting and owning a home – estimated to be as much as 30% less to rent.

    Mizuho analysts also expect homeownership affordability challenges to drive demand for rental houses, supporting tenant retention rates at the two companies. American Homes 4 Rent and Invitation Homes are averaging higher new and renewal lease rates compared to major apartment owners like AvalonBay and Equity Residential.

    While individual investors still dominate the single-family rental market, homebuilders have increased construction of new rental homes. In the third quarter, builders started work on around 24,000 single-family rentals, up from 17,000 a year earlier.