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Leading Indicators May Have Peaked, If So, Well Behind 2023

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Leading Indicators May Have Peaked, If So, Well Behind 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

The Consumer Price Index met economists’ expectations last week and inflation cooled modestly. Prices grew at an annualized rate of 3.4% in the 12 months ending in April, marking the first time since last December that annual inflation dropped. With that said, I do not expect the Fed to alter its path of monetary policy and we will likely see the first rate cut in Q3.

Multifamily fundamentals had another good week last week. The leading indicators, traffic and leasing, were flat for the second week in a row, but occupancy and rent ticked upward as the key performance metrics continue to grow throughout Q2. If we have reached the high-water market for traffic and leasing for the year, it would mark a significant slowdown from last year. Traffic peaked at 9.2 tours per property nationwide at the end of May last year. We are currently a full tour per property behind last year’s pace. Leasing topped out at 3.1 new leases per property last June, roughly a half lease per property above last week’s average.

We will be launching our latest round of rent, occupancy, and revenue per available unit forecasts later this week. If you’re interested in our national or metro level forecasts, please reach out and we would be happy to share them!

Key Takeaways – Data as of 05/19/2024

Traffic and Leases:

  • Miami has recently taken over the top spot in our absolute traffic rankings. Last week, the average Miami property saw 10.9 tours, besting San Jose, Dallas and Tampa. Demand in South Florida remains very strong despite affordability and environmental concerns.
  • While major sunbelt markets continue to see the most traffic on an absolute basis, small western markets have seen the largest annual traffic increases. Reno is averaging more than two additional tours per property per week compared to this time last year. Memphis, Colorado Springs, and Riverside have also seen significant improvement in traffic over the past 12 months.
  • Miami may be dominating the traffic, but Orlando and Tampa top our list for most leases signed per property. Orlando properties average 3.8 new leases signed per week, followed by Tampa at 3.3 weekly leases. Florida markets are well positioned to absorb the continued new supply being delivered over the next 12 to 18 months.

Occupancy and ATR:

  • Nationwide occupancy increased two basis points last week to 93.94%.
  • Huntsville’s occupancy rose 59 basis points last week, pushing the market’s occupancy rate above 94% and within 27 basis points of its occupancy from last May.
  • Colorado Springs and Albuquerque also had good weeks with occupancy increased 32 and 12 basis points respectively.
  • San Antonio maintains the lowest occupancy rate in the nation at 92.53%. Its peer markets in Texas are not faring too much better as Austin, Dallas, Midland and Houston are all among the eight weakest markets based on overall occupancy. With that said, each of the bottom eight markets saw occupancy rise last week, so some relief may be on the way.

Net Effective Rent:

  • Net effective rents increased 20 basis points last week at the national level.
  • Only 9 of the 45 markets tracked by Radix Research experienced NER declines last week, and the market with the largest drop, Chattanooga, saw rents fall 60 basis points. On the other hand, rents increased in 30 of the 45 markets, led by Huntsville with a 1% weekly jump.
  • As the year progresses, very little movement at the regional level has unfolded in terms of rent performance. Growing markets remain concentrated in the northeast, Midwest, mid-Atlantic and west coast with the exception of San Francisco and Los Angeles. The sunbelt continues to struggle under the weight of new supply.

Revenue Per Available Unit:

  • Revenue per available unit (RevPAU) posted another strong week, increasing 20 basis points nationwide.
  • 19 of the 45 markets tracked by Radix Research have seen RevPAU increase on a year-over-year basis.
  • Despite the continued annual declines for many markets, some are beginning to see signs of growth. Austin, Huntsville, Raleigh and Jacksonville, four of the five weakest markets, posted RevPAU growth last week. Other markets like Tampa and Orlando, both of which have annual RevPAU declines of more than 4%, showed strong demand from traffic and leasing activity.

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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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