Inflationary pressures remain throughout the economy; however, a welcome sight may be emerging as oil prices appear to have stabilized around $100 per barrel. While the cost of a barrel of oil remains elevated above long-term trends, the current price reflects a decline from its peak in recent months. For the past 4 weeks, oil has remained range bound between $95 and $110 per barrel.
Economists are focusing on both the Fed and GDP this week. The Fed will likely raise interest rates by at least 75 basis points when their next meeting wraps up Wednesday. With the clear goal of reducing inflation in mind, it would not surprise me if rates went up a full percentage point. Second quarter GDP will be released on Thursday. Another negative quarter would put the economy into recession.
Multifamily fundamentals continue to soften, and declining traffic, leases, and occupancy are now commonplace across most major markets. Net effective rents are increasing slightly at the national level, but the deceleration in growth from early 2022 has been swift and significant. Operating fundamentals will weaken as economic conditions remain volatile. Multifamily is a hedge to inflation as rents can be raised as leases expire, however, there is a limit to what renters are willing and able to afford for housing, especially as other components of a household’s budget increase. We will likely see renters choose to live with roommates or downgrade from high-end to more affordable housing.
Key Takeaways – Data as of 07/24/2022
Traffic and Leases:
Occupancy and Leased:
Net Effective Rent:
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