Residential REITs 2Q26 Earnings Preview | North America: Green Shoots First, Ask Questions Later?

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Residential REITs 2Q26 Earnings Preview | North America: Green Shoots First, Ask Questions Later?

IdeaM• What matters? Valuation still supports the risk/reward, with the group

screening at a ~17% NTM FFO discount to REITs, while starts and the pipeline

continue to roll over and supply relief remains early and uneven. The post-1Q

rally looked more technical than fundamental, so the next leg requires

evidence that Sun Belt green shoots are broadening and that coastal

strength can hold. The key issue is whether April/May leasing strength held

through June and into early July. We see a higher bar for names that already

disclosed stronger 2QTD trends, particularly ESS and UDR, which have

outperformed the group YTD. CoStar data suggests another early peak to

the Sun Belt leasing season, but we think this may already be reflected in the

price for MAA, whose ss-rev guide appears most at risk, and for CPT, whose

CA portfolio sale represents a ~25bps drag on ss-rev (though mgmt stated

the net impact on '26 guidance is effectively zero). Neither AVB nor EQR will

host a conference call given the pending merger (though both will provide

investor presentations). We'll look for any incremental detail on transaction

closing timing, synergy realization, operating leadership, development plans,

dispositions, and how stand-alone fundamentals are trending.

• What's our view? We are constructive on the setup, but it is no longer a

pure contrarian/low-bar trade and is increasingly bifurcated from a valuation

and YTD performance basis. Apartments remain the most compelling

medium-term recovery story because valuation is discounted, starts and

under-construction activity are falling, vacancy improved modestly,

absorption accelerated, and 2Q Sun Belt work shows real but uneven green

shoots.