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Employment Market Showing Signs of Cracking, May Accelerate Rate Cuts

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Employment Market Showing Signs of Cracking, May Accelerate Rate Cuts

Picture of Chris Nebenzahl

Chris Nebenzahl

The employment market has long been the backbone of the U.S. economy, as strong job gains coming out of the pandemic fueled significant macro growth. The national unemployment rate fell to the low three percent range, and some metro areas saw unemployment in the two percent range. While we are still adding jobs at a strong clip, unemployment has increased in each of the past three months. At this time last year, the unemployment rate was 3.5%. It is now 4.1%, and while that is still below the rate of full employment by historical standards, it shows that some cracks are beginning to emerge in the job market. Since last Friday’s employment report, several economists have been calling for rate cuts, and the potential for a July rate cut is back on the table. I don’t think the Fed will lower interest rates this month, however, they could use the meeting to clearly lay the groundwork for a rate cut in September.

As anticipated, the multifamily industry was mostly flat last week. July is typically the beginning of the stable period in our sector, and most key metrics will remain flat for the next month or two. Fundamentals will likely decline beginning in the late third and early fourth quarters. Growth may continue in certain markets where demand outpaces supply, and oversupplied markets may see further softening, yet nationwide the apartment industry will be mostly flat.

Key Takeaways – Data as of 07/07/2024

Traffic and Leases:

  • The average property nationwide saw 7.9 tours last week. Average leasing remained unchanged at 2.7 new leases signed per property.
  • One third of the markets tracked by Radix Research saw traffic increase last week. The strongest growth was geographically diverse, as Columbus, Dallas, LA, Salt Lake and Tampa all registered nearly a third of a tour per property above the prior week. Columbus is the only market of the five, however, that has seen annual traffic growth increase. Most markets are seeing between 1-2 fewer tours per week than they did at this time last year.
  • Reno, Midland and Raleigh led the nation in leasing growth last week. The northern Nevada market continues to see strong performance across operating metrics as demand remains steady.

Occupancy and ATR:

  • The national occupancy rate fell ever so slightly, ending last week at 93.98%.
  • Charlotte and Seattle led all markets, with both metros picking up 12 basis points last week. Seattle’s occupancy is up 30 basis points year-over-year and is one of the few markets in the nation with an occupancy rate of 95% or higher.
  • Relative growth across markets will be key as the second half of the year unfolds. Last week, four markets saw occupancy drop by more than 12 basis points. Columbia, SC and Memphis occupancy fell by more than 50 basis points last week alone.
  • After improving for most of the first six months, the national average availability worsened last week. Average properties have 13 units available in the next 60 days.

Net Effective Rent:

  • Net effective rents were unchanged last week at the national level.
  • Minneapolis and Seattle saw the strongest growth last week, with rents jumping 40 basis points in both markets. To go along with strong occupancy, Seattle rents have performed well, increasing 2.6% over the past year. It is the fifth fastest rent growth market on an annual basis.
  • While Reno had a good week in terms of leasing, NER fell 60 basis points. Despite the short-term decline, rents are still up more than 2.5% annually.

Revenue Per Available Unit:

  • RevPAU was also flat nationwide last week and remains down 1.8% year-over-year.
  • Along with Charlotte and Seattle, Midland, TX and Colorado Springs had strong weeks, with RevPAU increasing 40 basis points and 30 basis points respectively. Colorado Springs looks to continue digging out of a hole, as negative rent growth has weighed heavily on the western metro.
  • New York was one of the weaker metros last week as RevPAU fell 70 basis points. The nation’s largest metro has seen steady fundamental performance over the past year, so last week’s underperformance was likely an anomaly.

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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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