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Rent and Operating Trends Week of October 23rd

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Rent and Operating Trends Week of October 23rd

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Inflationary pressures remain the most important topic in the U.S. economy and this week we will have a glimpse into how higher prices are impacting consumer and corporate spending, as earnings will be released for the largest tech companies. Microsoft, Apple, Amazon and Google will all release their Q3 earnings this week, and it will be interesting to note if companies like Apple and Amazon see any significant change in consumer behavior. Google, whose performance is heavily driven off advertising revenue, could be a proxy for how businesses are choosing to spend in the rising price environment. In addition to the tech earnings, Thursday will also bring the first estimate of Q3 GDP, and its results will likely raise the question once again of “are we in a recession”. After two consecutive quarters of negative GDP, my view is that we are already in a recession. We should not change the definition just because this economic contraction may be different from others. While there are many economists who disagree and claim we are not yet in a recession because of our strong employment market, another quarter of negative GDP would likely lead more of the leading economic minds to declare our current economy in recession.

Multifamily fundamentals continued forward with additional stability in leading indicators Traffic and Leasing, and additional declines in occupancy, leased percentage and rents. The usual fall seasonality remains in almost all markets and will likely continue through the holidays and into next year. Transaction activity is slowing but operating fundamentals should remain in decent shape despite the slowdown, as the nation remains in a housing shortage, and single-family home development has quickly stalled.

Key Takeaways – Data as of 10/23/2022

Traffic and Leases:

  • Traffic and leases were both unchanged again last week at the national level. The conversion ratio has settled at 31.5%.
  • Houston and Dallas continue to lead all major markets in traffic, with the average property seeing more than 10 tours per property per week. Texas remains one of the strongest regions in the country for both employment and migration growth, and markets in the Texas Triangle, including Austin, San Antonio, Houston and Dallas are the largest beneficiaries of the growth.
  • While Austin doesn’t have the absolute traffic numbers of Houston and Dallas, it ranks as one of the most efficient leasing markets with a conversion ratio above 40%. Properties in the Texas capital are signing nearly 3 new leases per week.

Occupancy and Leased:

  • Nationwide occupancy fell another 8 basis points last week, and the national average occupancy rate is 94.81%. The national leased percentage also fell 8 basis points last week.
  • After a banner year in which many markets had average occupancy rates above 96%, only 3 of the top 30 markets now have occupancy above 96%. On the contrary, 2 markets, Las Vegas and Houston, now have occupancy below 94% and Phoenix is trending in that direction. With continued occupancy declines, Phoenix will fall below 94% in the next few weeks.

Net Effective Rent:

  • NER fell 20 basis points nationwide last week and the national average net effective rent is now roughly $50 below its all-time high this summer.
  • Only a few markets, most of which are in the Mid-Atlantic, registered rent growth last week. Charleston, Baltimore and Washington D.C. all saw rent grow modestly.


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