* Invitation Homes to own 59 pct of combined firm
* Equity market cap of new business to be $11 bln
* New company to be headed by Starwood Waypoint CEO (Adds Breakingviews link)
Aug 10 (Reuters) - Invitation Homes Inc and Starwood Waypoint Homes' shares both hit record highs after the companies said they would merge to create the biggest single-family rental firm in the United States.
The all-stock deal comes at a time when homeownership rates are still at near historic lows and incomes are not growing as quickly as home prices, making it tough for first-time home buyers to save for a down payment.
However, demand for both rental and new homes continues to be supported by an improving U.S. economy and healthy job growth.
The supply of single-family rental homes is very limited and demand has been increasing, Starwood Waypoint Chief Executive Fred Tuomi said on a conference call with analysts.
"Looking forward, with the demographic tailwinds, I think demand is going to continue to grow," Tuomi added.
As part of the deal, each Starwood Waypoint Homes share will be converted into 1.614 Invitation Homes shares based on a fixed exchange ratio, Blackstone Group LP-owned Invitation Homes said on Thursday.
Invitation Homes stockholders will own about 59 percent of the combined company's stock, with Starwood Waypoint stockholders owning the rest.
The deal would also reduce Blackstone's stake in the combined company to 41 percent, compared with a 70 percent stake in Invitation Homes.
The combined company, whose shares will continue to trade on the New York Stock Exchange, would own and manage a portfolio of about 82,000 single-family homes in the United states.
Both the companies have overlapping markets and majority of the combined firm's revenue would come from high-growth markets such as the western United States and Florida, the companies said in a statement.
Starwood Waypoint's Chief Executive Fred Tuomi will head the combined company.
Invitation Homes' shares rose as much as 6.9 percent to $22.43, the highest level since their February debut. Shares of Starwood Waypoint rose as much as 7 percent to hit a record high of $35.96.
Deutsche Bank Securities Inc and J.P. Morgan Securities LLC were financial advisers to Invitation Homes, while Morgan Stanley & Co LLC and Evercore advised Starwood Waypoint.
Reporting by Arunima Banerjee and Ankit Ajmera in Bengaluru; Editing by Arun Koyyur and Martina D'Couto