Demand decline prompts Raymond James to downgrade residential REITs ratings

LootboxPhobia · 2026-02-27T18:32:44+00:00

Raymond James downgraded residential REITs, warning that the deterioration in rental housing demand is faster than expected, emphasizing multiple adverse factors leading to a challenging rental market. Analysts pointed out that the summer demand recovery outlook is not optimistic, and the risks for the 2026 outlook have increased.

LootboxPhobia

2026-02-27 18:32:44

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Investing.com - Raymond James has downgraded the ratings of residential real estate investment trusts (REITs), warning that the deterioration in rental housing demand is happening faster than many companies or investors currently realize.

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Analyst Buck Horne wrote that the company “is expressing our growing concern that demand for all forms of rental housing is deteriorating,” and added that these pressures “continue and accelerate into February.”

Horne stated that many REITs are “ignoring the severity of the situation,” despite clear evidence to the contrary, and still predict a normal seasonal recovery in rental demand during the summer.

Raymond James believes that “there are no signs that this year’s rental demand will improve over last year’s disappointing results,” and warns that the sector’s guidance for 2026 now faces increasing risks.

The company cited multiple adverse factors, including “AI-driven job losses among young workers” and “increasingly aggressive domestic immigration enforcement,” both of which are impacting the formation of rental households.

Raymond James added that with increased rental incentives and heightened regulatory risks, the absorption time for new supply is lengthening.

The firm downgraded Essex Property Trust, Inc., Invitation Homes Inc., and American Homes 4 Rent from Strong Buy to Outperform, while upgrading NexPoint Residential Trust, Inc. from Underperform to Market Perform.

Raymond James also emphasized what it calls a “historic” reversal in multifamily housing demand. The company stated that evidence shows “the labor market is weakening, especially in the entry-level segment,” and that shifts in immigration trends are “turning toward potential net outflows in 2025 and 2026.”

High-frequency rent data shows the second derivative continuing to worsen, with over 80% of tracked markets deteriorating in the past 90 days. The company warns that early 2026 data suggests the “rental peak will be even weaker.”

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