AvalonBay, American Homes 4 Rent top picks among REITs at Mizuho

Investing.com -- Mizuho bullish on residential real estate investment trusts, named AvalonBay Communities (NYSE: AVB) and as top picks ahead the sector earnings. Despite a slow start to 2025 for Resi REITs amid concerns over rent seasonality, SoCal wildfires, and immigration policies, Mizuho (NYSE: MFG) sees stabilizing fundamentals.

January rent data suggests an improvement over December, supporting expectations for 2-4% market rent growth in apartments and 3-4% in single-family rentals for 2025.

“We expect new lease rates to inect positively into March / April, which historically has also supported stock prices,” analyst at Mizuho said.

New lease rates are projected to rebound by March or April, aligning with historical trends that often lift stock prices. Supply constraints through 2025-27 and robust economic conditions further bolster Mizuho's mid-2% same-store revenue growth forecast for apartments and high-3% for SFRs.

While potential risks from immigration and tariffs exist, Mizuho considers them manageable, particularly for high-quality assets owned by AVB and AMH. Both REITs are well-positioned with peer-leading earnings growth profiles and limited exposure to oversupply risks.

Mizuho maintained its favorable view on valuations, emphasizing AVB and AMH’s subsector-leading fundamentals and strong growth outlooks.

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