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:
Occupancy and Leased:
Net Effective Rent:
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