The economy and interest rate market are working in opposite directions at this point in the cycle. 336,000 new jobs were added in September, nearly doubling analyst expectations. While this is good news for the overall economy, it raises additional questions about the Fed’s course of action with monetary policy going forward. Continued strength across the labor market and macro economy will give the Fed room and reason to increase rates again at its upcoming meetings. Many suspect the Fed will raise rates at one of the remaining meetings this year, but if the economy continues to grow quickly, additional rate hikes may be in the cards. The 10-year treasury continues to push new heights based on the strength of the economy, the likelihood that short term rates will be higher for longer, and new geopolitical concerns brewing. War in the Middle East as well as increasing concern about an upcoming summit between the U.S. and China has pushed oil prices higher in recent days. If oil remains elevated rather than experiencing its typical Q4 slowdown, then inflation numbers are likely to stay elevated as well. The U.S. economy is in good shape, but with every subsequent positive report, the likelihood of higher interest rates for a longer period increases.
Leading multifamily indicators like traffic and leasing were flat last week, while lagging indicators including occupancy and net effective rent fell meaningfully. The occupancy slowdown has intensified and is quickly testing the 94% level nationwide. Many markets, especially in the southeast and southwest already have occupancy levels in the 92-93% range. With both occupancy and NER falling quickly, RevPAU is declining as well.
Key Takeaways – Data as of 10/08/2023
Traffic and Leases:
Occupancy and ATR:
Net Effective Rent:
Revenue Per Available Unit:
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