Rent and Operating Trends Week of November 6th

The U.S. economy received another positive sign last Friday, as the October jobs report once again outperformed expectations. While the overall number of new jobs added was the lowest since the end of 2020, the 261,000 new positions exceeded analyst expectations. The tight employment market supports the likelihood that the economic slowdown is modest. Tuesday is election day and the result of the midterm, especially in a few key senate and house races will dominate the news cycle. Unless there is a sweeping Democratic victory, which I do not foresee happening, I expect little change to the economic trajectory for the coming year. A slight democratic or republican majority in either the Senate or the House of Representatives will not lead to wide scale legislation, and thus I expect further softening in the domestic economy until inflation comes down.

The October consumer price index will be released on Thursday and another high read will pave the way for the Federal Reserve to hike interest rates another 75 basis points next month. After last week’s increase, the Fed funds rate is now at its highest point since 2008. In his remarks last week, Chair Jerome Powell indicated that interest rates will likely have to be raised to a higher level than initially anticipated when the Fed embarked on their current path of monetary tightening.

Multifamily fundamentals continue to weaken, although there are potential signs of a bottoming out across different indicators. Traffic and leases have been flat for a number of weeks, and occupancy losses are slowing. Net effective rent continues to fall, but rents are a lagging indicator to traffic and occupancy.