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Rent and Operating Trends Week of September 18th

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Rent and Operating Trends Week of September 18th

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The August Consumer Price Index came in higher than anticipated despite declining energy costs in recent months. Many economists were hoping for further deceleration in overall prices, and the unexpected increase sent markets into a tailspin. As a result, the Fed is now almost certain to raise interest rates at least another 75 basis points at their meeting this week. The higher-than-expected inflation numbers will likely lead to additional 75 basis point rate increases in future meetings as well. The 10-year treasury rate has also increased, and home mortgage rates are at generational highs. The for-sale housing market has been cooling significantly, which should provide additional support to the multifamily market, at least in the short term.


Multifamily market fundamentals softened further last week, as rents and occupancies continue to fall. NER peaked in mid-July and has declined consistently over the past two months. Nationwide, average NER is $1,910. Traffic and leases also continue to weaken. As inflation remains elevated, affordability issues are emerging once again in many large markets. Increased construction costs coupled with affordability concerns will be worth monitoring, if rent control legislation becomes a key topic once again.

Key Takeaways – Data as of 09/18/2022


Traffic and Leases:


  • Traffic declined last week, and the average property nationwide is seeing about 7.5 tours per week. Traffic peaked at 9.4 tours per property in late May and has slowly drifted downward since then.
  • Leases signed also declined, and the average property is now signing less than 2.5 leases per week.
  • Texas and Florida markets have maintained their dominance in leasing activities. Houston, Dallas, Jacksonville and Tampa had the most leases per property last week, as the average property in each market signed more than three new leases.
  • Coastal markets including San Francisco, New York, Seattle and Portland have the weakest leasing activity, with an average of just over 1 lease signed per property.


Occupancy and Leased:


  • Occupancy nationwide fell another 8 basis points last week, and the national average occupancy rate is now 95.13%.
  • 10 of the top 30 markets have an average occupancy rate below 95%, as new supply is once again dragging down occupancy. High development markets including Houston, Orlando, Dallas, Charlotte, Atlanta, Phoenix and Austin have seen some of the largest occupancy declines.
  • Nationwide, the leased percentage fell 11 basis points and will likely fall below 96% in the coming weeks.
  • While the coastal gateway markets may be struggling with traffic, they maintain some of the highest occupancy and leased percentages. New York, Boston and Los Angeles are all in the top 5 with leased percentages near or above 97%.


Net Effective Rent:


  • NER nationwide fell 10 basis points last week and has now fallen consistently for the past 8 weeks.
  • Salt Lake City and Raleigh, two smaller markets that have outperformed their peers in the past few years, led the nation in falling rent last week. NER dipped 70 basis points and 60 basis points respectively in the two markets.
  • Coastal gateway rent growth was split last week, as Boston and San Francisco were near the bottom, recording rent declines of 50 basis points in each metro. However, New York, Los Angeles and Washington D.C. all saw rents rise.


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