Dallas Tanner, Invitation Homes CEO, joins 'Money Movers' to discuss the July new home sales beating estimates and what it means for the housing market.

Washington

New home sales for July were reported at 652,000, a figure that exceeded market expectations but still represented an 8.2% decrease compared to the previous year. Industry leaders, including Invitation Homes CEO Dallas Tanner, noted that high home prices and mortgage rates are prompting more Americans to seek rental options, benefiting the rental market.

Tanner highlighted that the cost of homeownership is currently about $1,000 per month higher than renting, due to factors such as property taxes, insurance, and elevated mortgage rates. He also pointed out a growing mismatch between seller and buyer expectations, with many sellers opting to withdraw listings rather than lower prices, resulting in market stagnation and increased rental demand.

July new home sales beat estimates

New home sales data out last hour. The number came in at 652,000 for the month of July, stronger than expected. But still, it's an 8.2% decline year on year, a trend our next guest says benefits the rental market in particular because high home prices are sending more Americans looking for alternative options. Joining us now with his Outlook invitation home CEO, Dallas Tanner. Dallas, it's good to talk to you today. All right, so you have these new home starts that are, it looks great. It looks like there's lots of building going on. Home builders' sentiment is pretty good. And yet you say it's really the rental market that's benefiting, why? Well, definitely new construction's done well. I think if you look over the last three to five years, most home builders would agree. What we are seeing is just a propensity to renew in our business. So through, call it Q2, our renewal rate was roughly around 77%. So 77% of our customers are choosing to release on a year-over-year basis and staying with us about 40 months. That being said, they are looking for new product. We have roughly 1,500 homes that we've delivered either through our builder networks and some of the way that we're leveraging our balance sheet through the first two quarters coming in with brand new product for our customers, about 1,500 homes. And so there's definitely this demand for new product. I think where the spread is wide is around the costs. The costs to own are really expensive right now. Property taxes, insurance, HOA, let alone where mortgage rates have been, have on average made our markets about $1,000 a month cheaper than it would be if you were to own today. Okay, so what you have here is all this inventory where there's a mismatch between what sellers expect and what buyers expect. And it appears that in many cases, the buyers are not willing to lower the price to sell the homes, that they are pulling down the listings rather than lower the price. Is there a potential that because of these high mortgage rates or the high home prices or whatnot, that you're facing more competition from accidental landlords, people who don't, it's not that they intend to be landlords, but they're gonna rent rather than sell. You've certainly seen more listings move from the for sale bucket into the for lease bucket over say the last year. You know, that being said, I think as a home seller today, the data is really interesting. Yeah, three years ago, we had about a million units per Redfins data that were on the market for sale. Today, that number is about 2 million. So you start to think about what does that mean? It means it's actually not a supply issue anymore, it's a liquidity issue. Cheaper mortgage rates would likely bring sort of a lubricant into the system and allow much healthier transaction volume. I think we're at a seasonally adjusted number, just over 4 million units that are selling right now. And if you look back for the last five to 10 years, that number was typically between five and 6 million units. So everyone's at like a standoff, sort of looking at each other. We see it in our move out data. We survey our customers every time they leave. Roughly right now, somewhere between 16 to 19% of our customers are moving out to purchase a home. That number typically is between 20 and 25%. And that 16 to 19 is the last five quarters. So there's definitely like a standoff between, there's obviously plenty of inventory on the market for sale for a home buyer, but people just aren't transacting. And I think we need a little cheaper mortgage rate to sort of get that moving. Right, how cheap? What do you mean, does it need to have a five or can we do this thing in the low sixes? Well, if you look at what the builders have been able to do, they've been able to buy down rate very effectively for the past couple of years. They deserve a lot of credit. In some ways, they've buoyed home prices in a way that basically the whole country's benefiting by. But I think you're right, Carl, like if we could see mortgage rates come in on a hundred basis points, I think we would start to see, based on mortgage application data, a lot more of an aggressive buyer who would get back into the marketplace. But right now, 60, 70% of Americans that own a home are sitting with a pretty cheap mortgage rate. So when you do that math, it's a big premium to move right now.

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