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Big Week Ahead as Inflation and Fed Meeting Shed Light on the Future of Interest Rates

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Big Week Ahead as Inflation and Fed Meeting Shed Light on the Future of Interest Rates

Picture of Chris Nebenzahl

Chris Nebenzahl

It will be a big week for inflation and monetary policy, as the May CPI report comes out on Wednesday. Later that day, the Fed will conclude its June policy meeting with Chair Powell giving a press conference to discuss the current state of the economy and interest rates.

There is very little chance of an interest rate cut this week, but Powell’s commentary combined with the Fed’s dot plot, which shows how each voting member feels on interest rates, inflation and other key metrics, should shine light on when we may see the first cut. Market sentiment will be reflected in the movement of treasury yields later in the week. Strong inflation will likely weaken the chances of 2024 rate cuts, and send treasury yields upward.

Multifamily fundamentals were mixed last week as the leading indicators were flat or declined slightly, while rent and occupancy increased modestly. Traffic and leasing have likely peaked for the year, and I’ll be focused on how far these metrics drop over the next six months as a measure of continued demand for multifamily. Rent and occupancy will rise for the next few months and then begin their decline for the remainder of the year.

Key Takeaways – Data as of 06/09/2024

Traffic and Leases:

  • National traffic fell slightly to an average of 8 tours per property per week. Leasing activity remained unchanged at 2.7 new leases signed per property.
  • We are moving past peak traffic at the market level as well. Only 10 markets saw an uptick in traffic last week, compared to 28 markets with declining traffic. The magnitude of change was also meaningful. Columbus led all markets with traffic increasing by 0.4 tours per property last week. The weakest market, Huntsville, saw traffic fall by 0.8 tours per property. There were seven markets that lost at least a half tour per property last week.
  • Despite a minor slowdown in traffic, Dallas regained the lead with the highest average traffic last week. Properties are averaging 10.7 tours per week across the DFW metroplex. We will be diving into the fundamental performance of the Dallas metro this week on our market spotlight webinar series. Register here and dial in for more details on North Texas.

Occupancy and ATR:

  • Occupancy increased one basis point nationwide, and hovers just under 94%.
  • Small western markets continued their outperformance as Colorado Springs and Reno led the nation, adding 28 basis points and 24 basis points to their market occupancy rates, respectively. Reno is the best performing market for occupancy growth on an annual basis. Its market occupancy rate is up 1.68% from a year ago, more than double the next best market, Salt Lake City.
  • The Midland market may be starting to show some cracks as occupancy fell 9 basis points last week to 93.13%. The volatile oil market remains one of the top performing markets from a rent perspective, but it is slowing down quickly.
  • Unit availability remains tight, and ATR never experienced the typical Q2 increase we have seen in prior years. The average property nationwide has 13 units available to rent in the next 60 days.

Net Effective Rent:

  • The national average net effective rent increased 10 basis points last week but remains down 1.5% on an annual basis.
  • Washington D.C. had a strong week, as rents rose 80 basis points. The growth also pushed our nation’s capital up in the annual rent growth rankings. Rents are up 4.5% over the past year in Washington, with strong rent growth coming from Northern Virginia and a few submarkets within the District. The weakest rent growth in the metro comes from suburban Maryland submarkets, including College Park, Gaithersburg, and Landover.
  • While Columbus had a strong week from a traffic and leasing perspective, its 80 basis point weekly decline in rents was the largest in the nation. Rents in Columbus, however, remain up 2.6% on an annual basis.

Revenue Per Available Unit:

  • Revenue per Available Unit increased 10 basis points as well last week and the national average revenue per available unit is $1,712 per month.
  • Memphis led all markets with RevPAU increasing nearly 1% last week. The Tennessee metro has performed well recently, although is not garnering many headlines. Rents are mostly flat and leading indicators are low, however their leasing efficiency makes it one of the best markets in the nation in terms of closing ratio. Roughly 46% of tours turn into executed leases.
  • The mid-Atlantic had another strong week as Washington, D.C., Wilmington, Greenville and Virginia Beach were all in the top 10 for weekly RevPAU performance.

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Picture of Chris Nebenzahl
Chris Nebenzahl
Chris Nebenzahl is the Director of Economic Research at Radix, where he oversees all macroeconomic and multifamily market analysis. Chris has 15 years of multifamily experience in data analytics, research, asset management and acquisitions. Prior to his time in the multifamily industry Chris was a portfolio manager at Bank of New York, focusing in the government and commercial fixed income sectors.
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