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Rent and Operating Trends – Week of June 18th 2023

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Rent and Operating Trends – Week of June 18th 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

The U.S. economy rests on solid footing following last week’s Fed meeting. Interest rates remained flat last week, and while the Fed may yet raise rates once or twice more this year, the end of the tightening cycle is clearly in view. Inflation continues to slow down, yet the consumer remains strong. Both retail sales and consumer sentiment for May were released after the Fed meeting, with both metrics exceeding analyst expectations. Unemployment remains low and job formation continues, underpinning the strength of the economy. There will continue to be micro-recessions in different sectors of the economy, especially those dependent on leverage and debt financing, yet the macro economy will likely continue to move forward at a slow and steady pace.

Multifamily fundamentals were mostly flat at the national level as we near the midpoint of 2023. With each passing week it is becoming clearer that underlying demand remains for multifamily, but current market conditions will keep growth to a very modest level this year. Many markets will see slight declines in apartment performance as well. While we will not experience significant growth in many markets, we are also unlikely to see major declines.

Key Takeaways – Data as of 06/18/2023

Traffic and Leases:

  • Traffic and leasing were both unchanged at the national level this week. As a sign of continued demand, roughly half of the markets tracked by Radix Research recorded growth in traffic on a year-over-year basis. Prospective renters are still touring properties and signing leases, just not at the pace of recent years.

  • Dallas and Houston lead the nation in average tours per property per week, as the Texas markets are averaging 12 or more tours per property.

  • They are among the strongest markets for new leases signed as well, but sunbelt cities Orlando and Charlotte are also near the top. The Florida and Carolina markets have slightly higher conversion ratios than the Texas markets. All of these states are gaining population at some of the fastest rates in the country.

    Occupancy and ATR:

  • Occupancy was unchanged at the national level last week.

  • Smaller markets, including Albuquerque, Charleston and Minneapolis had some of the strongest occupancy increases last week.

  • While occupancy remains flat, ATR improved in almost all markets last week. This implies that prospective residents are signing leases, but have not yet moved in. If this trend holds true, occupancy will likely increase in the coming weeks.

    Net Effective Rent:

  • NER was flat last week and has remained around $1,880 for about four months. The lack of growth at the national level has resulted in year-over-year rent declines of 40 basis points. Without an acceleration in rents in the coming weeks, the year-over-year declines will widen, as last year’s rents followed a typical seasonal pattern of growth in the spring.

  • Albuquerque, Baltimore and Washington D.C. led the nation in rent growth last week, increasing by 70, 60 and 50 basis points respectively.

  • Rents fell in only a handful of markets last week, led by Los Angeles, Nashville and San Antonio. Except for Los Angeles, all markets that posted weekly declines last week have also seen rents fall on a year-over-year basis. Many of these markets including Nashville, Atlanta, Las Vegas, and Salt Lake City have significant supply pressure that is unlikely to slow down in the immediate future. Continued deliveries will put additional strain on multifamily fundamentals in these markets.

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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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