Rent and Operating Trends Week of July 31st

Key Takeaways – Data as of 07/31/2022

Traffic and Leases:

• Traffic fell to 8.3 tours per property last week, while new leases signed stayed flat. The national average conversion ratio is 32.5%.
• Roughly two thirds of the top 30 markets saw traffic declines last week, with San Jose and Seattle seeing the largest drops. On an annual basis, there were only 3 markets, Chicago, Albuquerque and Tampa, where traffic has increased compared to this time last year.
• Jacksonville and Houston led the nation with more than 3.5 leases signed per property last week. Given relative affordability and continued corporate migration, I expect the sunbelt markets to outperform the nation in terms of multifamily fundamentals for the foreseeable future.

Occupancy and Leased:

• Nationwide occupancy fell another three basis points last week, while the national leased percentage fell one basis point. Compared to this time last year, both occupancy and leased rates are down roughly 70 basis points nationwide.
• As occupancy weakens in almost all markets, 9 of the top 30 have now crossed below the 95% threshold often seen as a benchmark in the multifamily industry. Due to overall strong demand and a housing shortage that has endured from the end of the Great Financial Crisis, I don’t expect occupancy rates to fall too far, however, the softening is worth noting since occupancy was historically high throughout 2021.

Net Effective Rent:

• Net effective rent remained flat last week at $1,923, the first time in months NER has failed to increase on a weekly basis.
• Rents have decelerated at both the top and the bottom end of the top 30 market rankings. Miami rents, which had been growing at an annualized rate of 30% or more, recorded year-over-year rent growth of 15% last week. Meanwhile, Las Vegas and San Francisco, two of the slower growing markets last year, have also decelerated significantly, and year-over-year growth is below 4% in both western metros.