As we enter into the second quarter of 2023, it’s worth taking a step back and examining the current state of the macro economy and multifamily industry. Overall, the employment market is very strong, with unemployment rates remaining at around 3.5%. Inflation continues to be a challenge for both the economy and real estate market, with the Fed continuing to raise interest rates, although it appears that inflation has peaked.
In terms of the multifamily industry, 2022 was a choppy year, with the industry experiencing a slight recession, defined by two consecutive quarters of negative GDP growth. However, the industry remained relatively strong due to a strong labor market, with over 200,000 new jobs added in 2021 and 2022.
In terms of trends in the multifamily industry, occupancy rates have trended downwards since the end of 2021, when they reached an all-time high. However, there are signs of stabilization emerging in early 2023, with occupancy rates flattening out in the mid-90s range nationwide. Some markets, such as Phoenix, Las Vegas, and Houston, have seen dips in occupancy rates due to new supply constraints, but these markets are expected to do well in the long term as they absorb the new supply.
Traffic and leases have also seen a return to normalcy after a steady run-up in the first half of 2022, typical of a multifamily prime rental season. These metrics flattened out through the middle of the year and softened towards the end of the year, but it looks like stabilization is emerging in the early part of 2023. Another decent rental season is expected from March to June for most of the country.
Although there may be some volatility in the economy in 2023, with GDP potentially falling negative again, and some sectors, such as the tech and financial sectors, experiencing layoffs, overall, the employment market is expected to remain strong. The multifamily industry is also expected to continue to stabilize, with signs of normalization and a decent rental season expected in the coming months.
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