The U.S. economy continues to search for signs of optimism in the face of significant headwinds as we move into the third quarter. Persistent inflation has led to swift tightening of monetary policy which has in turn increased recession predictions from leading economists. While the short end of the treasury yield curve is increasing, yields on the long end of the curve have fallen since the last Fed meeting. The 10-year treasury rate fell below 3% last week after reaching as high as 3.5% in early June. This may be a welcome sight for borrowers looking for loans tied to the 10-year as many single family and multifamily loans are, however, 10-year yields are falling as a result of a more pessimistic future outlook for the macro economy. As of July 11th, the yield curve was inverted, as the yields on one- and two-year treasuries were higher than the 10-year treasury. A yield curve inversion is often a precursor to a recession.
Multifamily fundamentals, with the exception of NER, have turned negative as both seasonality and the macro economy have begun to impact the industry. While NER remains positive on both a weekly and annual basis, the rapid deceleration in rent growth continues. I believe the recession will be shallow and multifamily remains well positioned to weather the slowdown, however operating performance will likely take a hit in the coming months.
KEY TAKEAWAYS – DATA AS OF 7/10/2022:
Traffic and Leases:
Occupancy and Leased Percentage:
Net Effective Rent:
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