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Rent and Operating Trends – Week of October 22nd 2023

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Rent and Operating Trends – Week of October 22nd 2023

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Chris Nebenzahl

In what is perhaps something of a silver lining for the rental housing sector, recent data suggests it is the most expensive time to buy a single family home since the mid 1990s. But, as with all things in the current real estate market, there is more to the story.

The economy as a whole is doing generally well, but the housing market remains remarkably challenged. There were just 1.13 million homes on the market nationwide in September, the lowest total on record for any September.

With an extremely limited number of existing homes for sale on the market, and ever-higher interest rates driving up the cost of home ownership relative to renting, this, all else being equal would be a boon for institutional landlords, however the substantial recently delivered and soon to be delivered supply of apartments is putting the brakes on rent and occupancy growth.

Leading indicators like traffic and leasing remained flat nationwide last week, while we saw a continuation of the recent downward trends in RevPAU.

Key Takeaways – Data as of 10/22/2023

Traffic and Leases:

  • Nationwide, traffic and leases are both again unchanged vs the prior week.
  • In a positive note, Phoenix, which has struggled against headwinds created by substantial new supply, saw traffic slightly reduced week over week, but up slightly over the same period last year.
  • From a leasing perspective, Tucson, while flat week over week, is up nearly a half a lease per week relative to the same time last year.

Occupancy and ATR:

  • National occupancy continued its downward trajectory, falling a further 6 basis points again this week. The national occupancy rate is now 93.92%. As noted earlier this month, with the slow season approaching for our industry, we are unlikely to have seen the last of the challenges as it relates to occupancy.
  • Nearly every market declined in occupancy week over week, with Colorado Springs as lone positive growth exception at 11 basis points, and Jacksonville and San Jose remaining flat week over week.
  • Nationwide, not much has changed with ATR over the past several weeks, with the average ATR slightly up, but remaining around 15 units available for rent over the next 60 days.

Net Effective Rent:

  • Net Effective Rent again fell 20 basis points last week, bringing the national average net effective rent to $1,858.
  • Net Effective Rent fell almost universally across the board last week, with Portland the lone market to fall flat week over week.
  • While the theme has been that of a general softening across the nation over the past week, the rate of change was somewhat of a mixed bag with some markets increasing the pace of decline, with others slowing.

Revenue Per Available Unit:

  • RevPAU continues to be strained nationally, with a dip of 29 basis points this week, on top of a general downward trend of late.
  • Jacksonville (10bps), New York (10bps), and Tucson (80bps) were the few markets to buck the trend this week with improvements in RevPAU.

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