Rent and Operating Trends Week of September 4th

As the summer unofficially comes to a close, the U.S. economy finds itself in a similar place to where it was when the summer began. Volatility, disparity among economic indicators, and rising interest rates highlight the key aspects of the current economic landscape. And while we have focused mostly on the domestic economy, global market conditions are deteriorating even faster, especially in the Eurozone. European energy markets are in turmoil, as Russia has cut its energy supply to much of Western Europe. In the coming months we will likely see the largest economic impacts of Russia’s invasion of Ukraine, and fallout will dampen the global economy.

While some uncertainty remains, it feels like the U.S. economy may be getting used to a new normal from a growth perspective. The Fed’s transparency in their interest rate outlook and course of action has created an understanding within market players of how the next few months will look. I expect inflation to slowly weaken through the end of this year and into mid-2023. Prices for gas, airline tickets, and other consumer goods have already started to fall, and I anticipate a soft landing as consumer demand slowly declines from post-pandemic highs.

The multifamily industry continues to follow the general economy and is softening in line with historical trends. We have reached the normal period of seasonality following a strong, but typical leasing season. Net effective rent nationwide increased 3.2% from the beginning of March through the end of June and has now stayed flat since the beginning of July. I expect a slight dip in rents over the next six months before another seasonal growth cycle begins.