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Rent and Operating Trends Week of November 27th

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Rent and Operating Trends Week of November 27th

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After a short and quiet Thanksgiving week, economic data releases return in full force with a number of metrics set to be shared this week. GDP and November employment data will likely dominate the headlines, but the Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, will be announced. As the year winds to a close, the Fed will have one more policy setting meeting in mid-December, and recent reports have indicated some willingness to slow down the pace of interest rate increases. The equity and bond markets have priced this news in with major stock indices rising in recent weeks. Longer term treasury yields have also fallen, with the 10-year yield coming down 50 basis points since November 7th. The Fed will not stop their interest rate increases until inflation falls significantly, however by slowing the pace of increases they are hoping not to overshoot an interest rate level that allows for neutral growth.

Multifamily fundamentals continued their slow downward grind as the end of 2022 approaches. Traffic fell slightly last week, although given the Thanksgiving holiday, the modest decline in traffic was better than expected. Occupancy and leased percentages continued to soften in almost all major metros and rents slipped again. The national average rent is now down more than $60 from its peak in late July.

Key Takeaways – Data as of 11/27/2022

Traffic and Leases:

  • Traffic nationwide dipped slightly while new leases remained unchanged last week.
  • Houston and Dallas properties are still signing leases at a strong clip, as the average property in both Texas metros are signing roughly 3 new leases per week. Their leasing activity remains above this time last year, further indicating that demand for multifamily is supported at current levels.
  • Gateway markets continue to struggle as Boston, New York and San Francisco are averaging just above 1 new lease per property each week. Not only are the leasing numbers weak, but the conversion ratio in each of these metros is below 25%.

Occupancy and Leased:

  • Occupancy fell another 5 basis points nationwide last week, while the national leased percentage fell 6 basis points.
  • Only a few of the top 30 metros registered occupancy increases, however two of those markets were Houston and Phoenix. Even the slight increases represent a welcome sight for the two sunbelt metros as they have some of the lowest occupancy in the country and have also recorded some of the largest annual declines in occupancy. Similar to traffic, a flattening of the occupancy declines will provide evidence of continued demand for multifamily at today’s operating levels.

Net Effective Rent:

  • NER, which lags traffic and occupancy, fell 20 basis points last week at the national level.
  • California markets were hit the hardest, as San Jose, San Diego and San Francisco rents all fell 60 basis points or more. Interestingly enough, Los Angeles, was the only market in the top 30 to register growth, as NER increased 10 basis points.
  • Concessions continue to increase as property managers are looking for other ways to incentivize new tenants without dropping rent. Over the past week, concessions nationwide increased 11%, and over the past month concessions are up 33%.
  • Popular sunbelt metros including Austin, Tampa, Nashville, and Raleigh have seen average concessions nearly double in the past month.


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