Inflation took a significant step toward returning to normal in March as the CPI registered 5% annual growth for the first time in 2 years. Prices were up only 10 basis points on a month-over-month basis. The rapidly decelerating inflation figures should encourage the Fed to stop monetary tightening and leave interest rates where they are. Even though inflation has not returned to the 2-3% range the Fed is targeting, the trajectory of price growth is clearly slowing down, and further rate hikes will likely slow the economy more than necessary. The Fed will meet next in early May, but going back to Chair Powell’s last press conference in March, he outlined a case for the end to the tightening cycle.
Multifamily fundamentals were mostly flat last week. Rent growth continues onward, as the national average Net Effective Rent approaches $1,900 once again. Traffic and leases continue their steady performance, while occupancy is stable around 94.3%. With short-term interest rates potentially staying flat for the foreseeable future and the 10-year treasury seemingly range bound between 3.5% and 4%, rate stability will bring some deals back to the table. We will likely see transaction activity pick up modestly in the coming months, and then rise significantly at the end of 2023 and into 2024. 3-year bridge loans that closed between September 2020 and March 2022 will start to mature at the end of this year. Also, permanent loans with 5-to-7-year terms that closed between 2016 and 2018 will start coming due at the end 2023. The combination will lead to billions of dollars of loan maturities and force sellers back into the transaction market.
Key Takeaways – Data as of 04/16/2023
Traffic and Leases:
Occupancy and ATR:
Net Effective Rent:
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