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Rent and Operating Trends Week of October 9th

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Rent and Operating Trends Week of October 9th

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The employment market may finally be catching up with the rest of the economic slowdown, as the September jobs report missed estimates. While 263,000 new jobs were added to the economy, estimates called for 275,000. The unemployment rate dropped to 3.5% but the decline was due to a lower labor force participation rate, another sign of potential weakness in the job market. Employment remains the strongest aspect of the economy, but it may be losing its shine, which would align with the weakness seen across the broader market. The tech-heavy NASDAQ hit a two year low on Monday, and other major equity indices continue to trade lower. Interestingly enough, softer job growth could indicate to the Fed that their monetary tightening is working and may lead to slower interest rate increases down the road. The more significant indicator however will be the September CPI number, set to be released on Thursday.


Apartment fundamentals remain on the slow and steady downward trajectory that has been common for the past few months. In the wake of Hurricane Ian, Florida and Carolina markets saw traffic fall significantly last week. Tampa, the closest major market to where the storm came ashore, saw traffic fall by nearly a full tour per property last week, the largest decline of any of the top 30 metros. Jacksonville, Charleston, Orlando and Miami all saw traffic drop precipitously last week. Similar to past destructive hurricanes, I expect demand for apartments in areas severely impacted by the storm to increase in the coming weeks and months. Not only will people be looking for short term housing immediately, but multifamily properties have tended to endure severe weather better than single family homes.

Key Takeaways – Data as of 10/09/2022


Traffic and Leases:


  • Traffic nationwide fell to 7.4 tours per property last week, while new leases signed remained unchanged at 2.2. The nationwide conversion ratio is 29.7%.
  • The weekly changes remain negative for traffic and leases in most markets, however comparing current traffic to last years activity shows an uptick in most markets. Sizable growth on an annual basis in places like Salt Lake City and Albuquerque indicate continued demand in smaller markets.
  • Despite softening traffic and leasing activity, Jacksonville maintains the highest conversion ratio of any top 30 market at 41%.


Occupancy and Leased:


  • Nationwide occupancy fell 8 basis points last week to 94.91%.
  • About half of the top 30 metros have occupancy rates below 95%, and some major coastal metros like San Francisco will likely fall below the benchmark in the coming weeks. Coastal gateway metros tend to have some of the highest occupancy in the country.
  • The national leased percentage fell 10 basis points last week to 95.95%.


Net Effective Rent:


  • Rents fell again last week, and the national average net effective rent is down to $1,895.
  • Only 4 metros registered rent growth last week and the gains were modest. On the contrary, 12 of the top 30 metros saw NER decline by 30 basis points or more last week.
  • Rents have fallen consistently week over week since late July and are likely to continue falling through the remainder of the year.
  • Annual rent growth continues to decelerate as well, with year-over-year growth getting cut in half during the third quarter alone.


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