Rent and Operating Trends – Week of March 12th 2023

Another strong employment report was overshadowed by the collapse of two regional banks last week and over the weekend. Silicon Valley Bank was taken over by federal regulators and Signature Bank was closed by state regulators after concerns over the safety and availability of deposits led to a run on both banks. The Biden Administration, Treasury Department and FDIC have intervened to ensure the stability of the bank’s depositors and allow them to withdraw deposits even above the FDIC insured level. The downfall of these two banks represents the largest shock to the banking system since the Great Financial Crisis, and will have knock on effects throughout the economy. Silicon Valley Bank was instrumental to the tech industry and start up community, providing funding for many emerging companies over the past few decades. Signature bank’s closure will likely have a larger impact on the real estate market, as it served as a major lender for commercial real estate projects. The federal government has proclaimed that they are not bailing out these banks, and instead the backstopping of deposits will come from the FDIC’s Deposit Insurance Fund, made up of bank fees. The American taxpayers will not be supporting the bank’s failures. Instead, the losses will be borne by the shareholders of these institutions. As a result, regional bank share prices across the nation plummeted Monday, as investors sought safety. With interest rates continuing to increase and speculation for another recession rises, fears of additional bank failures are elevated.

As the fallout from the banking collapses continues, other key economic fundamentals will be released this week. February CPI will be announced Tuesday and retail sales will be released Wednesday. Both should serve as good barometers for the strength and health of the American consumer.

While the macro economy continues to flash mixed signals, the multifamily industry is beginning to show signs of growth. All major metrics improved week-over-week last week except for national occupancy. Traffic and leasing are both showing positive signs in the early stages of leasing season, and NER increased nationwide last week as well. We continue to anticipate a normal seasonal year in multifamily, and the next four months will be crucial for the overall year’s performance.