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Rent and Operating Trends – Week of July 9th 2023

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Rent and Operating Trends – Week of July 9th 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

The June jobs report showed continued steady growth, as 209,000 new jobs were created, and the unemployment rate fell 10 basis points to 3.6%. Economists had estimated 240,000 new jobs to be created and despite the slightly weaker than expected report, interest rates across the treasury yield curve increased with the 10-year treasury rate topping 4% for the first time since March. The cause for the sudden increase in rates is wage inflation. Average hourly earnings were up 4.4% on a year-over-year basis in June, and the elevated wage growth will increase the Fed’s likelihood of raising their benchmark interest rate again at their meeting at the end of this month. Signs of a strong economy remain, yet the persistence of inflation will likely keep the Fed committed to their monetary tightening policy.

Multifamily fundamentals were mixed last week; occupancy and traffic declined modestly while ATR and NER improved. The general sluggishness in leading indicators provides further evidence that the traditional spring rental season was weaker than in years past, and we may have already begun the flattening of fundamentals that is usually seen late in the third quarter. NER continues to increase slowly, but year-to-date rent growth is below the historical average.

Key Takeaways – Data as of 07/09/2023

Traffic and Leases:

  • Nationwide average traffic dipped slightly while average leasing remained unchanged last week. The national conversion ratio is 33%.

  • Salt Lake City led the nation in traffic growth last week, as the average property in the Utah capital had 8.5 tours. Traffic is up on both a week-over-week basis and a year-over-year basis, however the increase in tours has not translated into rent growth yet. The market continues to struggle with new deliveries as occupancy and rent growth remain negative.

  • Albuquerque and Tucson led the nation in growth for new leases signed last week. The small southwestern metros have very strong conversion ratios and their leading indicators have grown consistently on a weekly and yearly basis.

    Occupancy and ATR:

  • Occupancy continues to soften as the nationwide occupancy rate fell to 94.27% last week.

  • Five markets saw occupancy drop by 12 basis points or more. On the contrary, only one market, Albuquerque had weekly occupancy growth of more than 10 basis points. In total, only 12 of the 33 markets tracked by Radix research registered occupancy growth last week.

  • The number of units available to rent improved last week, and the average property nationwide has 13 units available over the next 60 days.

    Net Effective Rent:

  • NER increased 10 basis points last week to $1,883 nationwide. So far this year, rents have increased six dollars.

  • Minneapolis had the strongest rent performance last week, as average net effective rents increased 1.1%. The Twin Cities continue to bounce back after a rough period for rent growth at the end of last year.

  • San Francisco rents fell 40 basis points last week and are down 2.8% from a year ago. Average rent in the metro fell below $3,000 making it the fifth most expensive market in the country. Once the most expensive, San Francisco now trails not only New York, but Boston, San Jose and San Diego.

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Picture of Chris Nebenzahl
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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