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Invitation Homes static on positive rental signals

Blackstone-backed Invitation Homes began trading on Wednesday above its $20 a share initial public offering, as investors latched on to positive signals in the property rental market.

The Dallas-based real estate investment trust, which allows investors to buy and sell shares in a company that owns single-family rental properties, raised $1.54bn from its IPO on Tuesday, the largest public offering since mid-2015, according to Bloomberg data. However, at the close of trade on Wednesday the company’s share price was unchanged at $20.

The company was benefiting from an overall demand for housing, as well as a shift towards rental properties as rising rates compound constraints on the affordability of homes, said Edward Mui, a real estate analyst at Morningstar.

Though still at historic lows, US mortgage rates rose to a 2017 high on Wednesday but failed to break through peak levels seen after the US election. Home ownership remained near record lows, according to data for the fourth quarter of 2016 from the US Census Bureau.

“I think the company and investor demand benefits from the overall demand for housing, the recent historically low levels of new single family housing, and potentially affordability issues and other demographic trends pushing people to rent longer,” said Mr Mui.

Reits boomed after the 2008 financial crisis, snapping up cheap houses and renting them out as consumers shifted away from buying their own homes. Blackstone will retain a majority stake in Invitation Homes, which holds just shy of 50,000 homes across the US

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Having suffered over the second half of 2016 from rising interest rate expectations, which increase the cost of refinancing mortgages, Reits have stabilised since the US election. But the sector has lagged behind the broader market, as interest rates have moved upwards.

Apple shares were another standout on Wednesday, jumping 6.1 per cent to $128.75, the company’s best day since July 27 2016.

Investors cheered the company’s holiday quarter results, which showed a return to revenue growth amid a rebound in sales of the iPhone, its biggest source of revenue.

Wall Street analysts also homed in on another strong quarter of sales growth for services such as iTunes and iCloud, something that the company had said it planned on accelerating over the next few years.

The tech-heavy Nasdaq Composite index rose 0.5 per cent to 5,642.7, but Apple was unable to pull the S&P 500 higher, with the index trading flat at 2,279.6. The Dow Jones Industrial Average edged up 0.1 per cent to 19,890.9.

Upbeat manufacturing and jobs data pushed up Treasury yields, with the benchmark 10-year note rising 1.7 basis points to 2.47 per cent. The higher yield initially helped financial stocks move higher, but later closed the day flat.

Banks are thought to benefit from the upward trajectory of interest rates as more rapidly rising longer-dated yields increase income on lending faster than shorter-dated yields increase costs paid out on deposits.

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