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Rent and Operating Trends – Week of January 29th 2023

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Rent and Operating Trends – Week of January 29th 2023

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The U.S. economy grew at an annualized rate of 2.9% in the fourth quarter, according to the first read issued last week. While the final number may fluctuate mildly in the next two estimates, the strong fourth quarter indicates that the economy is on steady footing in the face of inflation and other headwinds. After a mild recession in the first two quarters of the year, the U.S. economy grew at a strong and steady clip over the second half of 2022. We are not out of the woods yet, as there is still a decent chance the economy falls into recession at some point this year due to the aggressive monetary tightening and the resulting run up in interest rates, however, with the strong GDP read combined with continued strength in the employment market, I expect a future recession would be modest.

Fed officials will meet later this week to vote on additional interest rate increases. The consensus estimate is for a 25 basis point increase, which would bring the Fed Funds Target Rate to between 4.5% and 4.75%. The 10-year treasury rate has remained relatively flat for the past month, averaging around 3.5%.

Multifamily performance is beginning to show signs of growth, as traffic increased significantly last week. Most other fundamentals were modestly positive or negative, but the strong uptick in traffic should bode well for other indicators in the coming weeks and months. All of our top 30 markets saw traffic rise last week and nationwide, the average increase was 0.7 tours per property.

Key Takeaways – Data as of 01/29/2023

Traffic and Leases:

  • Traffic growth was led by Chicago and Charlotte, as tours per property increased by 1.7 and 1.3 respectively. There were 5 markets in which average traffic increased by more than 1 tour per property.
  • On an annual basis, traffic continues to perform well, with Riverside and Nashville registering more than 2 tours per property per week compared to this time last year.
  • Leasing is also improving in almost every market in the country, however the overall average growth at the national level is not quite as strong as the traffic growth. With only 2.2 leases signed on average last week, compared to 7.5 tours per property, the national average conversion ratio fell to 29%.


  • Occupancy fell 1 basis point nationwide last week, but the national average ATR dropped as well. Occupancy has seemingly found a bottom in the past month, and declining ATR indicates new leases are being signed with move in dates coming soon.
  • Gateway markets and heavily supplied secondary markets saw their occupancy rates increase last week, another strong sign for areas that were hit particularly hard last year. San Jose, Riverside, Chicago, Phoenix and Nashville rank in the top 5 for occupancy growth last week.

Net Effective Rent:

  • NER nationwide increased 10 basis points last week. I expect rent performance will remain fairly flat for the next few weeks and then begin increasing at a stronger pace in March.
  • 3 California markets, San Jose, Riverside and San Francisco led the nation, as rents in each market jumped by 50 basis points or more last week.

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