As the fall approaches, the U.S. economy continues to show signs of a slowdown, however given the strength of the employment market, the likelihood of a soft landing is high. The price of oil retreated from its recent high in June, and if the trend continues, I expect to see inflation decline as well. All eyes will be on Jerome Powell and the Fed’s annual conference in Jackson Hole this week. Powell will speak on Friday and will likely reiterate the Fed’s support for increasing interest rates regardless of an economic recession. While this may further drive volatility in equity markets, I believe the short-term pain will be worth it, as an economic restructuring was needed. While inflation remains high, household and corporate balance sheets remain strong, unemployment is at historic lows, and on a global scale, the U.S. economy is performing comparatively well. A modest slowdown will likely continue through the remainder of this year before a new growth cycle emerges.
The multifamily market is rapidly returning to more normal levels for growth and operating metrics. As rents remain flat over short-term periods and quickly decelerate on an annual basis, I expect the national average annual rent growth rate to end the year in negative territory. The combination of general inflation reaching 40-year highs and rent growth accelerating at a historic pace has led many households’ budgets to be stretched thin. Owners and operators are realizing they can no longer drive rent growth, and I anticipate stagnant or declining rents at least through next spring.
Key Takeaways – Data as of 08/21/2022
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