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Rent and Operating Trends – Week of June 11th 2023

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Rent and Operating Trends – Week of June 11th 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

The Federal Reserve left interest rates unchanged at its June meeting, which concluded on Wednesday. While this is the first meeting without an interest rate increase since last March, the Fed indicated there may be additional rate hikes coming this year. The median “dot plot”, which measures the interest rate expectations of Fed members, increased to 5.6% at this week’s meeting. This signifies that many Fed members see the need for two additional rate hikes at some point in the future. Inflation has been trending downward, but if prices do not continue to cool, the Fed will likely raise rates again in July or September. The pause allows the Fed to monitor the economy and ingest additional data before its next move, but Fed Chair Powell warned against thinking that the monetary tightening cycle is over.

Multifamily fundamentals were mixed last week as NER increased another 10 basis points. Traffic and leasing were flat at the national level, while occupancy dropped slightly. June is typically the strongest month of the year in the apartment industry, and the general steadiness is an indication we will see weaker performance in 2023 than originally expected. Continued demand has created a solid foundation for our industry, but growth will be hard to come by at the national level.

Key Takeaways – Data as of 06/11/2023

Traffic and Leases:

  • Traffic nationwide is about two tours per property beneath the historical average at this time of year. The average property receives about nine tours, while in years past, the national average was typically between 11 and 12 tours per property.

  • Las Vegas had the strongest week for traffic growth last week, a welcome sight after the market has struggled from a rent and occupancy perspective. Traffic also accelerated in Boston, one of the gateway markets that has been outperforming the national average in most apartment metrics.

  • While Texas and Carolina markets are still signing the most new leases per week, the fastest growth in leasing activity is taking place in Florida and California. Orlando, San Jose and San Diego had a strong week last week in terms of new lease growth.

    Occupancy and ATR:

  • National occupancy has spent the vast majority of 2023 range bound around 94.3%.

  • Some high supply markets are showing resiliency, such as Charlotte, Houston, and Nashville, which all rank in the top 5 markets for occupancy gains last week. Their market occupancy is still down on a year-over-year basis, but the recovery shows the impressive demand that remains in the sunbelt.

  • ATR nationwide improved modestly last week, and the average property now has 18 apartments available to rent over the next 60 days.

  • The tightest markets from an ATR perspective are all western MSAs, as Albuquerque, Portland and Tucson lead the nation averaging just 13 apartments available to rent.

    Net Effective Rent:

  • Net effective rents for our same store sample fell 20 basis points year-over-year. This marks the first time since 2020 that annual same store rent growth is negative.

  • On a weekly basis, NER increased 10 basis points, and the national average rent is $1,881.

  • Albuquerque led all markets, as NER grew 1.8% last week. The New Mexico market has performed well and is one of a select few markets where rents are up on an annual basis.

  • Salt Lake City continues to struggle with new supply as rents were down 80 basis points last week.

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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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