Rent and Operating Trends Week of October 30th

The US economy bounced back in the third quarter, posting growth for the first time this year. After two quarters of negative growth, which sunk the US economy into a technical recession, GDP increased 2.6% on an annual basis. While the economy is growing again, I expect the recession to return in the coming months, as the impact of the Fed’s rapid monetary tightening is felt across all sectors of the economy. Inflation will likely continue to run hot, which will force the Fed’s hand into additional interest rate increases. The employment market remains healthy, although further cracks are emerging. Tech and real estate companies are among those laying off employees. Zillow made headlines recently, announcing layoffs for roughly 300 employees, many of whom were in the Zillow home loans department. Residential lending has dried up significantly as the result of decades high mortgage rates forcing many homeowners to stay put and avoid new home purchases or refinances. It will likely be a very sluggish year ahead for the lending industry.

Multifamily fundamentals have continued the steady downward trajectory they have been on for a number of months now. Rents and occupancy rates continue to fall, traffic and leasing has bottomed out, and concessions are on the rise. For the better part of 2021 and into 2022, concessions were practically non-existent except for in a few markets. However, rental incentives in the form of concessions have returned quickly, increasing 15.7% last week at the national level, and 39% on a month-over-month basis. San Francisco and San Jose, two of the weakest markets for rent growth over the past 3 years, have the highest concessions of any of the top 30 markets.