The U.S. economy continues to adapt to a new paradigm. Easy money policies from both the Fed and Congress are behind us, inflation continues to run hot, and the rapid GDP growth that followed the COVID shutdowns has dwindled. The stock, commodity and cryptocurrency markets may still be in for a period of volatility, but the general economy seems to have ground to a slow pace. The second estimate of first quarter GDP and the April Personal Consumption Expenditures (PCE) index will both be released at the end of this week and will serve as barometers for the overall economy. GDP was initially estimated to have fallen in Q1. If the second estimate is also negative, we could be seeing the early stages of a recession sooner than many predicted. PCE is the preferred inflation measure of the Fed and will likely give us a good indication of what the Fed will do at its June meeting. Another month of high inflation will likely lead the Fed to a second consecutive 50 basis point increase in interest rates.
Multifamily fundamentals remain strong considering the softening economic conditions. I am particularly focused on the year-over-year comparisons as we move through this year’s prime rental season. While we do not see the acceleration we had last year, the annual growth rate in NER is staggering, especially given the high rents seen in 2021 that we are now comparing to. Nationwide NER is up 13.4% from last year, and the average NER is $1,892.
Key Takeaways – Data as of 5/22/2022:
Traffic and Leases:
Occupancy and Leased Percentage:
Net Effective Rent:
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