Home Mortgage Rates Decline to Lowest Point Since May 2023 | RAOT – Aug 11th, 2024
Rent and Operating Trends – Week of August 11th 2024
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A Mortgage Rates Decline
According to last week’s data from Freddie Mac, the average rate for a 30-year mortgage hit its lowest level in more than a year. It dipped to 6.47% as of August 8, down from a peak of 7.79% in October 2023. Even with the decline, affordability remains a major challenge in the single-family home industry. It has been almost two years since the average 30-year mortgage rate was below 6.0%.
Key Economic Data This Week
This will be a busy week for economics readings, and the following reports are highly anticipated after the unimpressive jobs report from a couple weeks ago.
The producer and consumer price indexes for July will be released by the Bureau of Labor Statistics. They are key indicators related to inflation and most economists are hopeful they will trend in a direction that gives the Fed confidence to lower the benchmark interest rate at some point soon. The Commerce Department will report on the latest trends for retail sales which will shed light on consumer spending. Also, the University of Michigan’s preliminary report on August’s Consumer Sentiment Index will give us a view on how people feel about all the recent headlines in the economic and political worlds.
Unemployment insurance claims, metro-level job growth, and the number of buildings permitted for construction are among other metrics being released this week.
EQR Purchases 11 Assets from Blackstone
Another large apartment acquisition was announced last week. Equity Residential (EQR) stated that it has agreed to purchase 11 assets from Blackstone for close to $1 billion. The assets are in the markets of Atlanta, Dallas-Fort Worth, and Denver. On average, the properties are eight years old.
Multifamily Performance
Apartment performance remained steady through mid-August. Rents are still below last year’s level in many MSAs, but the most turbulent times are likely behind a lot of markets at this point. The national occupancy rate has held close to 93.9% the entire year, and the U.S. is on track to absorb more than half a million units in 2024. As long as the economy holds, many areas are poised for growth rates closer to historical norms in 2025.
Key Takeaways – Data as of 08/11/2024
Traffic and Leases:
- The national occupancy rate has also been very steady despite elevated supply levels. National occupancy was 93.94%, and it has been within approximately 10 basis points of that rate since March. The seasonal decline in occupancy usually begins at the end of September.
- Markets with an occupancy rate of 93% or lower have faced challenges with rent growth this year, and they typically offer more concessions. Atlanta, Colorado Springs, Dallas, Jacksonville, and San Antonio currently have occupancy rates below that threshold. Austin and Phoenix are only slightly higher than 93.0%.
- The number of units available to rent changed marginally, down 1 basis point from the prior week, but it was up 28 basis points from the prior year at 4.66%.
Occupancy and ATR:
- The national net effective rent held steady from last week, and it was down 1.4% from a year ago. Relative to the same week last year, rents were up in 19 MSAs, flat in two, and down in 24.
- On a week-to-week basis, a handful of markets increased rents by 60 basis points, including Columbus, Nashville, and Riverside.
Net Effective Rent:
- The national net effective rent was unchanged from last week, and it was down 1.5% from a year ago. Relative to the same week last year, rents were up in 19 MSAs, flat in one, and down in 25.
- Notably, the one market with flat annual rent growth was San Francisco, which has lagged San Jose in the Bay Area’s for apartment performance this year, but it appears to be stabilizing. Several of its submarkets are now experiencing rent growth, including South of Market, South San Mateo, and East Alameda.
- On a week-to-week basis, rents declined in only 12 markets, but most markets will begin lowering rents soon as traffic slows and occupancy rates decline during the fall and early winter.
Revenue Per Available Unit:
- RevPAU was up 1 basis point from the prior week, but it was down 150 basis points from the prior year, driven mostly by rent declines.
- Huntsville had the biggest weakly gain in RevPAU, up 130 basis points. Chattanooga lost 80 basis points.
- Seven markets have annual RevPAU growth of 3% or higher, including New York, Columbia, and Reno. The biggest declines in RevPAU from a year ago were Austin at-10.3%, Jacksonville at -7.5%, and Tampa at -6.2%. As a note, Hurricane Debby did not appear to have a material impact on the numbers.
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