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Rent and Operating Trends – Week of November 19th 2023

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Rent and Operating Trends – Week of November 19th 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

Is the monetary tightening cycle over? Has the Fed orchestrated the illusive soft landing for our economy, reducing inflation to a sustainable level without sending the nation into recession? The answers to these questions are still yet to be fully determined, however last week’s lower inflation report provides further evidence that future interest rate increases me not be needed. Inflation dropped meaningfully in October compared to prior months, and annual prices are up only 3.2% from a year ago. As we approach the winter months, lower oil prices will likely keep inflation modest. With inflation in check and economic growth remaining robust, the possibility of a soft landing is growing. Most inflationary environments end in recession, however GDP remains strong and job growth is steady, especially given how tight the labor market remains.

The multifamily industry continues its steady fundamental decline as the holidays approach. Rents nationwide slid again last week, but the annual declines appear to have flatlined around 1.5%. Occupancy is falling but at a slower pace than a few months ago. With additional supply delivering, especially in the southeast and Texas, occupancy will likely decline for the foreseeable future.

Key Takeaways – Data as of 11/19/2023

Traffic and Leases:

  • Traffic nationwide remained unchanged last week, while new leases signed dipped.  
  • Gateway markets registered some of the largest gains last week, as New York added more than a half tour per property, while Chicago led all markets in weekly leasing gains.  
  • While Dallas and Houston no longer lead the nation in traffic, they remain on top of the rankings for new leases signed. Both Texas metros averaged 2.9 new leases signed per property last week. 

Occupancy and ATR:

  • The elevated leasing activity has had a positive impact on Chciago’s occupancy rate. Last week, occupancy in the Windy City increased 12 basis points. Las Vegas also had a strong week, gaining 11 basis points of occupancy. Despite having one of the lowest occupancy rates in the nation, Las Vegas appears to have found some stability. Annual occupancy is down only 30 basis points over the past year, a much smaller decline compared to other sunbelt markets in the southeast and southwest. 
  • ATR increased slightly last week, but there remains roughly 15 units available to rent per property nationwide.

Net Effective Rent:

  • Net effective rents fell another 20 basis points last week. As another sign that seasonality has returned to the multifamily industry, net effective rent declines have continued on a weekly basis, yet annual declines have leveled off. This aligns with the typical trend of weekly softening in the fall and winter months. 
  • Albuquerque, one of the strongest performing markets this year, saw the largest decline in rents last week. Charlotte, Jacksonville and Atlanta also had poor weeks, with rents falling at least 40 basis points in each market. 
  • Colorado Springs led all markets in rent growth last week, picking up 30 basis points.  

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