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Economy and Multifamily Market Moving Slowly at Midpoint of 2024

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Economy and Multifamily Market Moving Slowly at Midpoint of 2024

Picture of Chris Nebenzahl

Chris Nebenzahl

The economy has stayed mostly unchanged through the first half of 2024, as employment outperformed, and inflation and interest rates have remained elevated. The second half of the year will likely be characterized by a series of “wait and see” situations. When will the Fed cut rates? How many cuts will there be? Will the job market remain hot? What will be the economic impact of the upcoming election? Without any major dark clouds on the horizon, but also no major catalysts for growth, I suspect the second half of the year to be fairly similar to what we’ve experienced in the economy thus far this year.

The multifamily industry is beginning its mid-summer plateau as the leasing season is mostly behind us. Occupancy reached 94% nationwide a few weeks ago, but it was short lived, and with last week’s minor decline, the national occupancy rate once again has a 93 handle. Leading indicators have been flat for the past few weeks and will likely stay that way through the summer. Net effective rents continued to grow last week, but rent is a lagging indicator. NER may continue to increase for a few more weeks, and then flatline with the other key performance metrics.

For more in-depth analysis on the first half of 2024, be sure to look for our 2024 Mid-year review and Second Half Outlook, which will be published in the next few days.

Key Takeaways – Data as of 06/30/2024

Traffic and Leases:

  • Traffic was mixed nationwide last week, as 21 markets saw increasing traffic, while 24 markets saw flat or decreasing touring activity. As we move away from the prime leasing season, I expect markets will be split in terms of traffic growth before most markets decline.
  • Southeastern markets led the nation in traffic gains last week, as Huntsville claimed the top spot. Memphis and Tampa also had good traffic weeks.
  • Huntsville also led the nation in leases signed last week. Properties in the Alabama metro averaged 3.9 new leases at the end of June. If this demand continues, Huntsville’s overall multifamily performance should bounce back quickly. It’s a small market so the impact of new supply was significant, but elevated demand should move the market back into positive territory soon.

Occupancy and ATR:

  • Occupancy fell 1 basis point and now sits at 93.99% nationwide.
  • Minneapolis saw the largest occupancy growth last week, picking up 13 basis points. The Twin Cities are also the metro with the strongest year-to-date occupancy improvement. Market occupancy has increased 1.4% since January.
  • As the calendar moves to July, I’ll be focused on the relative performance of the top and bottom occupancy markets on a weekly basis. Minneapolis, Seattle and Midland, TX were the top three markets for occupancy growth, as their occupancy increased by 13 basis points, 8 basis points and 7 basis points respectively. On the other end of the rankings, Salt Lake City, Reno and Las Vegas lost 14 basis points, 10 basis points and 9 basis points of occupancy respectively last week. These changes are similar at the top and the bottom, but an early indication of the fall slowdown, will be when the bottom performing markets start falling at a much faster rate than the top performing markets are growing.

Net Effective Rent:

  • Net effective rents increased 10 basis points nationwide but remained down 1.6% year-over-year. The 1.8% year-to-date growth in NER is slower than in previous years.
  • San Francisco and Portland, two metros whose multifamily markets have struggled significantly in recent years, were at the top of our rent growth rankings last week. Portland rents are now flat on an annual basis, and San Francsico rents are back in line with the national average, declining only 1.6%. Moreover, rents in San Francisco are up 3.1% year-to-date. Perhaps the one submarket that has been used as the posterchild for a weak COVID recovery, Downtown San Francisco, has seen rents grow 5.3% so far this year.
  • As we shift to the second half of the year, rents will likely flatten and decline, with the largest losses coming in the sunbelt. Northern markets may cool but should do so in a normal seasonal pattern.

Revenue Per Available Unit:

  • With occupancy staying mostly flat, rents drove the majority of the RevPAU movement last week. The same markets positioned themselves near the top of the RevPAU rankings.
  • Interestingly, Virginia Beach and Columbia, SC, were among the weakest performing RevPAU markets. These two markets have been among the strongest over the past year, but recent data shows a quick drop-off for both. These markets and the severity of their declines will be worth watching as the seasonal slowdown begins.

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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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