Thus far, the U.S. economy is handling the recent banking crisis and last week’s interest rate hike well. Capital markets have remained stable and appear to be reacting positively to the Fed’s position on the economy. During his press conference following the last FOMC meeting Fed Chair Jerome Powell intimated that the monetary tightening cycle will likely end soon, and market prognosticators now predict one more 25 basis point increase in May before an extended period of flat interest rates. Powell insisted that the bank failures at Silicon Valley Bank and Signature Bank were isolated events and that the financial system remains on solid footing. He also mentioned that he is aware of the concentration of commercial real estate loans in regional banks but does not see comparisons to the issues that led to SVB’s failure. While monetary tightening will likely end in the coming weeks, I do not expect interest rates to decline in the near future. With inflation working its way back to the 2-3% range and employment remaining strong, Powell voiced his support for keeping interest rates flat for the remainder of the year once they stop raising rates.
Multifamily leading indicators continue to improve nationwide as both traffic and leasing ticked upward last week. Both metrics have shown steady growth early in 2023 and are just barely negative on a year-over-year basis. Occupancy and ATR were mostly unchanged, while NER improved modestly. As employment remains strong and inflation recedes, demand for apartments will continue to return to normalcy. The spring rental season is underway, and data is starting to support a strong trend for owners and property managers.
Key Takeaways – Data as of 03/26/2023
Traffic and Leases:
Occupancy and ATR:
Net Effective Rent:
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