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Rent and Operating Trends – Week of August 13th 2023

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Rent and Operating Trends – Week of August 13th 2023

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Chris Nebenzahl

Inflation rose modestly last week, as the July CPI checked in at a 3.2% annualized rate, slightly above the June read, but below analysts’ expectations. While I don’t think this will be enough of a move to force the Fed to raise rates again, the rest of the yield curve continues to increase. The 10-year treasury yield is 4.19% as of Monday, nearing its recent high, last seen in October 2022. If it breaks above 4.25% it will be the first time the 10-year yield has been that high since 2007. Most home mortgages and fixed rate multifamily mortgages are tied to the 10-year, and given the recent increase in long-term rates, these financial instruments are getting significantly more expensive. The average home mortgage rate is nearing 8%. This may serve as a silver lining for multifamily demand, as fewer would-be home buyers are able to afford to purchase homes. However, the increase in both long and short-term interest rates is making it very difficult for multifamily owners to refinance existing assets, many of which carry interest rates far lower than the current market.

Multifamily fundamentals were mostly flat last week, a typical pattern for this time of year. At the market level, weekly growth remains mixed as some metros are enjoying an extended leasing season, while others are declining against a backdrop of heavy supply and soft demand. As this week’s chart of the week demonstrated, all MSAs are losing occupancy on an annual basis, yet roughly 15% of submarkets across the nation have seen occupancy rise over the past year. As our industry slogs through a down cycle, it is important to note that not all submarkets or MSAs will act alike. 

Key Takeaways – Data as of 08/13/2023


Traffic and Leases:

  • Both traffic and leases signed were unchanged at the national level last week, with the nationwide conversion ratio sticking at 33%.

  • Chicago led the way, as properties across the metro averaged one additional tour per property last week, compared to the week before. Apartment communities in the Windy City are averaging 11.4 tours per week, with the urban core submarkets including Gold Coast and River North leading the way.

  • Charleston, Las Vegas, and Miami experienced the strongest leasing growth last week, as properties picked up roughly a third of a lease on average.

  • San Francisco and Portland are struggling from a leasing perspective with the average property signing fewer than two leases per week.

Occupancy and ATR:

  • Occupancy remains down across all markets on an annual basis, however weekly occupancy rose in roughly half the MSAs tracked by Radix Research.

  • Tucson, Charleston, and Colorado Springs saw the largest increases in occupancy as each metro’s average occupancy rate rose at least 8 basis points.

  • Minneapolis and San Antonio had the largest drops in occupancy, falling 10 basis points or more last week. Minneapolis’ occupancy has been relatively steady, falling only 35 basis points in the past year, however San Antonio occupancy appears to be in free fall. The Texas metro has lost 278 basis points of occupancy in 12 months and has the lowest market occupancy of any metro in the country.

Net Effective Rent:

  • Rents were flat nationwide last week and mixed at the market level.

  • On a same store basis, the best performing markets are small southwestern MSAs including Tucson and Albuquerque, and older northeastern and midwestern markets including Chicago, Boston, and Baltimore. Each of these markets has seen rents rise 2.5% or more in the past year, while the national average rent is down 1.4%.

  • High supply markets in the southwest including Salt Lake City, Las Vegas, Austin, Colorado Springs, and Phoenix are struggling as rents are down 5% or more in the past year. There is limited hope in sight, as rents are falling on a weekly and monthly basis in these markets as well.

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