The nation's largest single-family home landlord is betting on high tenant demand as it expands its number of houses for lease and leans into its rapidly growing third-party management business.

Invitation Homes said revenue rose 8.8% in the second quarter with a 97.5% occupancy rate across its portfolio. But at the same time, it noted weakness in some of its traditionally best-performing markets.

The real estate investment trust plans to complete an additional 691 houses for rent in the second half of the year, just a fraction of its 2,700-property pipeline that will be made available for lease over the next few years, executives told investors on a call Thursday to discuss earnings. The Dallas-based company is also anticipating the completion of the purchase of a stake in single-family rental business Upward America and adding its 4,400 houses to its management portfolio.

“This has been the busiest time of year for us,” Charles Young, Invitation Homes’ president and chief operating officer, said on the call.

Invitation Homes reported funds from operations, a key measure of performance for REITS, increased 7.3% to $0.47 per share in the second quarter compared to a year earlier. As a result, Chief Executive Officer Dallas Tanner said the REIT was raising its guidance for the year to $1.87 per share.

The firm said its portfolio of rental houses has residents staying for an average of three years or longer. Tanner said he expects demand from renters to persist as the affordability gap between homeownership and leasing grows.

"There has never been a more compelling time to lease a home than today,” he told investors. “Two years ago, it was just under $700 a month more expensive to buy than to lease on average in our markets. Today, the cost of homeownership is nearly $1,200 a month more expensive than it is the lease.”

Especially in regions where house prices are rising, such as along the West Coast, Invitation Homes is seeing strong rental demand, and it’s noticed residents are staying in place for longer.

Though Tanner and other executives are betting on the affordability challenges of homeownership driving renters to Invitation Homes, signs are emerging that the brand could soon encounter hurdles.

For one, some of what the company called its “high-flying” markets softened in the second quarter, especially in Sun Belt states such as Arizona and Florida. Executives cited Phoenix as well as Tampa, Orlando and Jacksonville in Florida as examples, and they said the weaker activity was probably driven by seasonal shifts, supply sensitivities and price fatigue.

“These are markets where there's a lot of action happening on the build-to-rent side,” Charles Young, the company’s president and chief operating officer, told investors. “You couple that with the kind of moderation and seasonality, a little bit of fatigue. … I think it’s a little bit of both.”

Executives said the change is just a “normal moderation,” though, and they expect that activity in slower markets will “pop back up.”

“We don't think there's anything to be alarmed about,” John Olsen, the brand’s executive vice president and chief financial officer, said during the call. “The markets are still quite healthy, but maybe just not quite as strong as we had expected at the beginning of the year.”

At the same time, another potential risk: The supply of for-sale existing homes is rising across the country. Inventory of pre-owned single-family houses, condos and co-ops reached its highest level in four years, according to the latest data from the National Association of Realtors.

Part of Invitation Homes’ strategy is partnering with national and regional homebuilders to acquire new developments that can be leased instead of sold. That allows the firm to be play a role in easing the housing supply shortage while also easing affordability challenges for consumers, according to Tanner.

To be clear, some of Invitation Homes’ markets, including Chicago, Southern California and Seattle, are still “firing on all cylinders,” Olsen said, telling investors that in those markets new lease rate growth was above 5%.

“We feel really good about that,” he said. “Long story short, we’re not seeing any kind of fundamental shift in the business.”

Another burgeoning challenge facing Invitation Homes is growing costs driven by property taxes and repair fees.

The company reported its spending on repairs and maintenance grew 24.3% on a yearly basis and its property taxes grew 10.3% on a yearly basis. At the same time, rental revenue grew just 4.7% compared to the same time the previous year.

Executives said part of that increase in repair and maintenance spending was caused by extreme summer weather, especially higher temperatures earlier than anticipated.

“Typically what we see is when HVAC season starts, you see a big pickup in work order volume as people start turning those systems on and discovering what sort of repairs or other maintenance might be required,” Olsen said. “Once we've gotten through that, you see that the volume of work orders sort of dissipate on the back end. The shape of that curve this year looks really familiar and very comparable to last year. It's been just shifted forward a little bit.”

At the same time, higher property taxes have forced the company to be cautious, especially in Florida and Georgia. Executives maintain their stance that they expect property tax expenses to remain elevated through the third quarter but noted that there are some early signs that prices will ease in Georgia.

Some states, including Washington and Minnesota, however, had lower than expected property tax costs, offsetting some of the increases elsewhere. Lower turnover expenses also helped mitigate the costs of property taxes.

But executives remain bullish about the second half of the year as they look forward to some seasonal bounce back and the upcoming addition of Upward America.

“We feel quite good about controlling the things that are in our control,” Olsen said.