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Rent And Operating Trends – Week Of January 1st 2024

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Rent And Operating Trends – Week Of January 1st 2024

Picture of Chris Nebenzahl

Chris Nebenzahl

The U.S. economy had a surprisingly strong 2023, as prognosticators initially forecast a high chance of recession at the beginning of the year. Instead, equity indices performed very well, with the S&P 500 rising 24%, job growth continued its steady expansion, and economic growth outperformed nearly all expectations. A key driver through it all was the consistent decline in prices as inflation returned to the 2-3% range by the end of the year. The economy begins the year on very stable footing. Few are calling for a recession in the near term, while many expect slow but deliberate growth throughout the year. With no major dark clouds on the horizon, the economy is poised for a balanced year as monetary policy shifts and a federal election approaches.

The multifamily market remains fragmented, based mostly on localized supply and demand fundamentals. As the calendar flips to a new year, we can now begin focusing on the spring 2024 leasing season, which should begin in just a few months. Heavy supply markets across the southeast will remain under pressure as deliveries continue. However, these markets remain among the most sought-after for new residents. U-haul and United Van Lines published their 2023 migration studies, and the top locations remain consistent from previous years. Texas once again topped the U-haul state rankings, followed by Florida, North Carolina, South Carolina, and Tennessee, all states with metros struggling to absorb new supply. The United Van Lines study found Vermont and Washington D.C. at the top of their inbound migration rankings, but both North and South Carolina were in the top 10. Migration trends are slow to change, and the most outmigration remained concentrated in California, the northeast and Midwest. Major gateway markets, except for Washington D.C., continue to see material outmigration.

Key Takeaways – Data as of 1/1/2024

Traffic and Leases:

  • Traffic and leasing activity were flat nationwide last week. The last week of the calendar year is typically a quiet week in multifamily.
  • At the beginning of 2024, properties nationwide are averaging 6.4 tours per week and signing 2.2 new leases.
  • San Jose leads all markets in traffic with just under 10 tours per week, followed by major southeastern metros: Dallas, Houston, Miami and Atlanta.
  • The southeast also dominates the leasing market. Houston leads all markets, averaging 2.7 new leases signed per week, followed by Tampa, Dallas, Nashville and Austin. The leading indicators tie back closely with the data released from the moving companies. As long as these markets maintain high demand, they will be fine in the long run as the supply wave eventually dissipates.


Occupancy and ATR:

  • Occupancy was flat last week and has fallen 69 basis points over the past year. The national average occupancy rate is 93.68%.
  • A few markets had a good year last year from an occupancy perspective, as Washington D.C., Seattle and Colorado Springs all reported positive year-over-year occupancy growth. The rest of the markets nationwide however posted negative performance, led by San Antonio, whose occupancy fell 2.34%.
  • New York has the highest occupancy nationwide at 96.05% and is the only market with occupancy above the 95% benchmark. By contrast, seven metros begin the year with market occupancy below 93%. They are all located in the southeast or Texas.


Net Effective Rent:

  • Rents fell 10 basis points last week, and the national average net effective rent begins the year at $1,823. Year-over-year NER is down 1.5%.
  • The trend in rent growth between markets has continued but appears to be widening. Well performing markets like Tucson, Albuquerque, Boston, Chicago, and Washington D.C. maintain annual rent growth of 3% or higher. Underperforming markets in the southeast and Salt Lake City continue to see rents dip lower. 4 markets have rent declines of 5% or more over the past year. The middle of the pack seems to be dwindling as well. Over the past year only 6 markets have NER growth or declines of less than 1%.
  • As the year progresses, I would expect to see these gaps widen further, at least until the supply begins to abate.


Revenue Per Available Unit:

  • RevPAU fell 7 basis points last week and has fallen 2.1% over the past year.
  • New supply continues to weigh on RevPAU, especially in markets where both rents and occupancy rates are falling. The southeast has some of the weakest performing markets from a RevPAU perspective.
  • However, it’s not just the oversupplied markets that are feeling the pinch. Markets with weak demand and outmigration such as Los Angeles, San Jose and San Francisco are seeing RevPAU fall despite stable occupancy. Rents are driving overall performance lower in major California markets.

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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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