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Rent And Operating Trends – Week Of March 24th 2024

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Rent And Operating Trends – Week Of March 24th 2024

Picture of Jay Denton

Jay Denton

As expected, the Federal Reserve kept interest rates steady last week, but many Fed officials still predict multiple rate cuts this year. Investors responded favorably and the stock market reached new highs after the announcement. In addition to lowering the mortgage rate for single-family home purchases, lower interest rates would ease pressure from monthly credit card payments for consumers and businesses. According to the Fed, the average interest rate on a commercial bank credit card was 21.5% in the fourth quarter of 2023, the highest in at least 30 years and up from 14.9% at the end of 2019. Many businesses also leverage lines of credit, and in aggregate, the higher rates could have an impact on job growth.

The multifamily industry showed flat or positive week-to-week movement for its major indicators in the latest Radix weekly report, which is typical for this season. That said, most figures are at weaker rates or levels compared to prior years. For the U.S. and most metros, occupancy remains below last year’s level which is impacting rent growth. As detailed below, traffic and leasing volume are both down from historical averages. Those leading indicators suggest 2024 will not be the year occupancy rates bounce back closer to 95%, which would ultimately lead to stabilized rent growth. The good news is that the number of units available to rent is not increasing as fast as it normally does. That suggests more residents are renewing their leases as operators are more conservative and trying to protect occupancy.

Key Takeaways – Data as of 3/24/2024

Traffic and Leases:

  • Traffic showed a marginal increase from last week with an average of 8 tours per property. Compared to last year, tours are off by 0.3 per week. Looking back to the average from 2019-2023, properties are experiencing about 1.5 fewer tours per week in 2024.
  • On a week-to-week basis, Virginia Beach saw the biggest improvement, picking up an additional 1.1 tours, and New York, Riverside, and San Antonio all gained approximately half an additional tour. San Diego lost half a tour from its prior pace.
  • On the other end of the spectrum, Huntsville, AL is 2.4 tours per week below its level from a year ago, and its rent growth is the second lowest in the country. Two markets to watch are Chicago and Boston. Traffic is down in both by about 1.5 tours per week compared to a year ago, but they still have rent growth between 2-3%.
  • Leasing at the national level was flat last week and the average property in the U.S. signed 2.6 new leases, approximately the same number as a year ago, which is good considering traffic is down a bit. Of course, lower rents and higher concessions likely help convert traffic.
  • Leasing volume was consistent week-to-week for practically all metros. Similar to traffic, Reno shows the biggest year-over-year gain with 1.4 additional leases per week, while Huntsville is down 0.9.

Occupancy and ATR:

  • National occupancy held at 93.8% from the prior week, down 41 basis points from last year..
  • Occupancy improved in 32 of 45 markets last week, a positive trend as we enter the prime leasing season. Occupancy typically increases until the end of the third quarter. We will be watching to see how much momentum markets are able to achieve given the lingering impact of supply.
  • Compared to a year ago, San Antonio, Austin, Charlotte, and Atlanta all have occupancy rates at least 100 basis points below last year’s rate. On the other end of the spectrum, occupancy rates are up by at least 40 basis points from a year ago in Reno, Minneapolis, Las Vegas, and Wilmington.

Net Effective Rent:

  • Rents increased 0.1% last week at the national level and remain down 1.5% on a year-over-year basis.
  • Of larger markets, Boston and Seattle stand out from most others as rents in both locations increased 0.5% from the prior week and up roughly 2.2% from a year ago. Rents held steady from last week in Chicago and Washington, DC, but they were up 2.9% and 3.7% from a year ago, respectively.
  • Many markets are still experiencing a contraction in rents as demand has moderated and supply has increased. On an annual basis, rents are down 8.4% in Austin, 5.4% in Nashville, and 4.9% in Atlanta. Little progress was made in the prior week to reverse that trend.

Revenue Per Available Unit:

  • RevPAU improved 0.3% from the prior month, but it was still 2.0% below the rate from a year ago.
  • There are nine markets where RevPAU is down at least 5% from a year ago, and all are in TX, AL, GA, FL, TN, or NC. Given high levels of new construction, those areas will continue to face challenges throughout 2024, and are likely on a longer recovery timeline relative to many other parts of the coun

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Jay Denton
Jay Denton is the Chief Economist at Radix, renowned for his role in enhancing the company's brand through SaaS innovation and thought leadership. With a knack for distilling complex data into actionable insights, Jay excels in driving product development and strategic presentations. Passionate about employee development and cross-departmental collaboration, he implements the EOS framework to align efforts towards the company's vision.
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