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Rent and Operating Trends – Week of April 30th 2023

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Rent and Operating Trends – Week of April 30th 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

The Fed will meet on Tuesday and Wednesday this week, and economists anticipate another interest rate hike of 25 basis points, bringing the Fed Funds target rate to between 5.0% and 5.25%. There is widespread speculation that this will be the last interest rate increase, as inflation metrics are trending downward, even if they remain above the Fed’s target. There are still hopes for a soft landing across the broader economy, however the interest rate increases will have a meaningful impact on multifamily. Upcoming loan maturities will put owners of multifamily in a difficult situation as refinance rates are almost guaranteed to be higher than their original interest rates, and buyers will be pricing in higher borrowing costs on their underwriting. Multifamily valuations are likely to fall through the end of the year and into next year.

On the operating side of the business, multifamily remains well balanced and is growing steadily. Occupancy and new leases signed were unchanged last week from the week prior, while traffic and net effective rent increased modestly. As traffic continues to rise while new leases signed have stayed flat, the nationwide conversion ratio is falling. Demand remains for apartments; however, residents seem to be more selective this year and are shopping around for apartments as concessions and leasing incentives have increased.

Key Takeaways – Data as of 04/30/2023

Traffic and Leases:

  • Traffic grew in about 58% of the markets tracked by Radix Research last week, led by Minneapolis, New York, and Miami. All three markets have also experienced steady traffic growth on an annual basis.
  • Chicago, one of the strongest markets in terms of traffic and rent growth thus far this year, saw traffic decline by the most of any market last week. Overall weekly traffic remains well above the national average in Chicago, however, given the strength of the first quarter, the decline in apartment searches may be an indication of a shorter rental season in the Windy City this year.
  • Dallas, Houston, Tampa, and Jacksonville continue to lead the nation in leases signed per week, averaging 3.4 or more new leases each week. While there is ample supply in these markets, the demand remains strong. According to the U.S. Census Bureau, 9 of the top 10 fastest growing counties in the U.S. for domestic migration are in Texas and Florida.

    Occupancy and ATR:
  • Nationwide occupancy remained unchanged last week. After declining steadily for about 18 months, the national occupancy rate has held firm at 94.3% since January.
  • New York led the nation in occupancy growth last week, increasing by 15 basis points. The Big Apple now ranks second behind San Jose for the highest occupancy in the nation at 95.9%. Gateway markets have historically maintained stronger occupancy and after dropping during the pandemic, all gateways are now back in the top 10 markets for occupancy.

    Net Effective Rent:
  • Net effective rents rose another 10 basis points last week and are now up $20 year-to-date on a same store basis. Rents are up almost across the board, as only 6 markets tracked by Radix Research posted declines last week.
  • Gateway markets performed well last week, as Boston, Chicago and Los Angeles occupied the second, third and fourth spots in our NER rankings, behind only Albuquerque. Rents increased 30 basis points in each market last week.

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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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