The US midterm elections will result in a split congress with Democrats maintaining control of the Senate while Republicans will likely win a narrow majority in the House. As a result, I do not expect any sweeping legislation in the next two years, but as President Biden has intimated, there will hopefully be some bipartisan resolution and progress in policy making. Democratic control of the Senate chamber will allow executive appointees to be approved and open cabinet positions to be filled, but the gridlock will lead to very modest legislative action.
From an economic perspective, the results of the election do not change my expectations for the trajectory of growth. I continue to anticipate modest contraction in the coming months. Equity markets rallied last week on the heels of the October CPI reading which, showed inflation is starting to come down. Stocks had their best day since 2020 on Thursday. With inflation moderating, market experts now anticipate the Fed to slow their interest rate increases to 50 basis points at the December meeting. However, the Fed is far from the end of their monetary tightening and we should prepare for additional increases in interest rates until inflation has returned to roughly 2%.
Multifamily operating fundamentals continue to weaken as we approach the final month of 2022. Rent and occupancy, which have been falling steadily, continue to drop, and traffic, which appeared to have flattened, fell again last week. As we have seen for most of the year, the weekly and monthly declines are modest, and long term multifamily remains a favorable asset class, but the current slowdown has certainly taken the luster off the sector from the past few years.
Key Takeaways – Data as of 11/13/2022
Traffic and Leases:
Occupancy and Leased:
Net Effective Rent:
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