Camden Property Trust (CPT): Capitalizing on High-Growth Markets with Robust Returns
We recently published a list of 10 Best Residential Real Estate Stocks To Buy. In this article, we are going to take a look at where Camden Property Trust (NYSE:CPT) stands against other best residential real estate stocks to buy.
Home Buyers Have More Bargaining Power than Sellers, Says Economist
The rate hikes which started in March 2022 as a battle against inflation are coming to an end as the Federal Reserve finally decided to cut rates for the first time since 2020. The rate cuts were kicked off with a half-percentage point reduction on September 18. This long-awaited move lowered rates to about 4.875%, at the midpoint. With an optimistic view in mind about inflation cooling off, the big rate cut will be catering to the employment slowdown. The news just doesn’t end here since the officials have pointed to another half-point reduction before the year’s end.
For the housing market, the big rate cut could be taken as a signal from the Fed to reverse the mortgage lock-in effect but the extent of easing matters. While an aggressive reduction in rates will reduce financing costs, create an inventory of existing homes, and reduce pressure on home prices, a gradual reduction won’t be of much value for the homeowners who are holding on to their early-pandemic low mortgage rates. The anticipation of a rate cut at the September Fed meeting has brought down mortgage rates to as low as their lowest since February 2023. However, the dropping mortgage rates are a double-edged sword as they could potentially raise the demand so much thereby making home buying even harder.
In an interview with CNBC, Senior Economist Orphe Divounguy from Zillow emphasized the impact of rate cuts on housing affordability. Although affordability remains a challenge, the market is improving. In his opinion, the best time to act for home buyers is right now as the current scenario offers them a perfect entry point with more options and bargaining power being somewhat shifted from the sellers to the buyers. The number of active listings on the real estate platform has gone up by 22% since last year. Although short-term rates are expected to decline, longer-term rates like mortgage rates could remain at the current level. He expects more buyers than sellers in the market with improving affordability. Sellers will also be in good shape as well-priced and well-marketed homes are selling in just 20 days, according to company data.
With that being said, let’s move to the 10 best residential real estate stocks to buy.
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A high-rise office building with the company's logo prominently displayed in the center of the facade.
Camden Property Trust (NYSE:CPT)
Number of Hedge Fund Holders: 35
Camden Property Trust (NYSE:CPT) is a REIT that serves as one of the largest publicly traded multifamily companies in the United States. The company engages in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities in the country. It owned and operated 172 properties comprising 58,250 apartment homes as of August 31, 2024.
Camden Property Trust (NYSE:CPT) focuses on high-growth markets boasting robust employment and population growth, from where it derives over 95% of its net operating income. The REIT operates a diverse portfolio of assets with more than 58,000 apartment homes positioned in 15 major US markets. Camden’s resident profile is high quality with an average annual household income of approximately $121,000 and an average rent-to-income ratio of 19% for new move‐ins in 2024 to date. Furthermore, it has delivered consistent earnings and dividend growth since 2020.
With a strong demand for multifamily rental housing, the market trends align in the favor of the company. Net apartment demand was over 200,000 apartments during the first half of the year. Nearly 70% of young adults choose to rent while pent-up demand is also coming from those young adults living at home. The homeownership rate for these adults is significantly low and the propensity to rent stands high in Camden markets. The share opting for apartments is also increasing as more households are making the choice to live alone.
For the year’s second quarter, the REIT reported a core FFO of $1.71 per share which was $0.04 ahead of the midpoint of its prior quarterly guidance. Development activity remained strong. Camden completed construction on an 189-unit $71 million single-family rental community situated in Texas while beginning construction of a 420-unit $163 million 4-story garden-style new development, and a 349-unit $154 million 3-story garden-style new development.
With the monthly cost of owning a home almost 60% more than leasing an apartment, the market seems promising for Camden Property Trust (NYSE:CPT). Considering the firm’s aforementioned successful strategy and the tailwinds, it is an attractive residential real estate company to consider.
Overall, CPT ranks 5th on our list of 10 best residential real estate stocks to buy. While we acknowledge the potential of CPT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CPT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.