As the holidays approach, this will be the last RAOT report of the year, and we will continue our weekly reports in the new year. First and foremost, we would like to thank you for your interest, your feedback, and your input as we’ve grown Radix and the RAOT report over the past year. We appreciate all that you do for us!
The U.S. economy will end 2022 in a far different place from where it began the year. There were both expected and unexpected factors that weighed on the economy this year. Inflation began rising last year, and the Fed’s reaction to rising inflation was top of mind for many when 2022 began. True to form, inflation dominated the economic conversation all year. However, we also experienced unexpected and heightened geopolitical tension this year after Russia invaded Ukraine and the global energy and food markets were immediately disrupted. Geopolitical issues in China and other parts of the world have also put pressure on the global supply chain and economy.
We experienced a recession in the first two quarters and have endured the most severe monetary tightening in a generation this year. Equity markets have been volatile, and all major indices entered bear markets this year. Through it all, employment has remained the port in the storm amid the economic challenges, and job growth has continued steadily throughout the year. The pace of growth has slowed, however, given the hawkish monetary policy, and any continued growth is a positive on the job front.
As we shift gears and look ahead to next year, I expect the economy to continue the grind that it’s currently on. I anticipate another recession either in Q4 of this year or in early 2023. Inflation will continue to come down from its June 2022 peak, but the Fed will continue to raise rates, until inflation is dropping quickly and appears poised to return to the 2% level. It will not surprise me if the Fed then must reverse course toward the end of next year and begin dropping rates again.
The multifamily market may not experience the volatility of the overall economy, but I anticipate the industry slowdown will continue through the year. We will likely return to a normal seasonal leasing pattern, with growth in most markets in the spring and early summer. The second half of the year will likely stagnate and fall slightly, as we have seen in many previous years in the apartment industry. All told, we anticipate average rent growth of 1.7% nationwide next year.
Key Takeaways – Data as of 12/18/2022
Traffic and Leases:
Occupancy and Leased:
Net Effective Rent:
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