Raymond James has reduced its ratings on several residential real estate investment trusts, arguing that rental housing demand is weakening more rapidly than companies and investors may be prepared for.
In a note, analyst Buck Horne said the firm is “voicing our deepening concerns that the current demand deterioration across all forms of rental housing,” and added these pressures “have only continued and accelerated into February.” Horne criticized some REIT forecasts that assume a normal seasonal rebound, saying many are effectively “whistling past the graveyard” by projecting a typical leasing recovery for the summer despite contrary evidence.
The firm expressed skepticism that leasing demand will improve relative to last year’s disappointing results, writing there are “no signs yet that this year’s leasing demand will improve any relative to last year’s disappointing results.” Raymond James warned that sector assumptions embedded in 2026 guidance increasingly appear at risk if current trends persist.
Raymond James pointed to several structural and cyclical headwinds it believes are pressuring renter formation and leasing velocity. Among those cited were what the firm labeled “A.I.-driven job displacements among young adults” and “increasingly aggressive domestic immigration enforcement activities,” both of which the firm said are weighing on the formation of renter households. The note also said absorption timelines for new supply are slipping amid growing lease concessions and an intensifying regulatory backdrop.
As a result of its reassessment, Raymond James lowered Essex Property Trust, Inc., Invitation Homes Inc., and American Homes 4 Rent to Outperform from Strong Buy. NexPoint Residential Trust, Inc. was moved higher to Market Perform from Market Underperform.
The firm described the shift in multifamily demand as “historic,” and cited evidence of a softening labor market concentrated at the younger, entry-level segment. It also flagged shifting immigration trends that it said are “flipping toward potential net outflows in 2025 and 2026.”
Raymond James referenced high-frequency rent measures showing deteriorating momentum, noting second derivatives have continued to worsen and that more than 80 percent of tracked markets have deteriorated over the past 90 days. The firm warned that early 2026 indicators point to “a softer peak leasing season” ahead.
Summary
Raymond James downgraded select residential REITs and cautioned that leasing demand has deteriorated further into February. The firm cited labor market softness among younger workers, potential immigration-driven net outflows in 2025-2026, slipping absorption for new supply, and worsening high-frequency rent trends as reasons to reassess sector outlooks and 2026 guidance assumptions.