On Monday, Raymond James shifted its stance on NexPoint Residential Trust (NYSE: NYSE:), raising the stock from Market Perform to Outperform. The firm set a new price target of $50.00 for the company’s shares. The upgrade comes in response to a renewed institutional interest in workforce-housing assets, particularly in the Sun Belt region.
The analyst pointed to a robust economy that has spurred higher-than-anticipated household formation and multifamily housing demand throughout 2024, which has helped to mitigate the impact of a significant increase in new housing supply. Despite the overall rental rates in markets with oversupply remaining negative, recent data suggests a potential turning point in the Sun Belt area.
According to the firm’s recent analysis of asking rents from CoStar, about 70% of the key markets they monitor in the Sun Belt have shown positive rent growth trends over the past three months. While new lease pricing continued to face downward pressure in these markets during the third quarter of 2024, occupancy rates have been more resilient than expected, and the frequency of tenants moving out to purchase homes has dropped to the lowest recorded levels in the sector’s history.
The analyst’s commentary underscores the significance of the current economic conditions and their effect on the multifamily housing sector, especially in the Sun Belt markets. The positive adjustments in rent growth and the decrease in move-outs to purchase homes are seen as indicators of the sector’s strength and potential for continued performance.
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