This is a narration of our weekly Rent and Operating Trends Report.
Inflation rose modestly last week, as the July CPI checked in at a 3.2% annualized rate, slightly above the June read, but below analysts’ expectations. While I don’t think this will be enough of a move to force the Fed to raise rates again, the rest of the yield curve continues to increase. The 10-year treasury yield is 4.19% as of Monday, nearing its recent high, last seen in October 2022. If it breaks above 4.25% it will be the first time the 10-year yield has been that high since 2007. Most home mortgages and fixed rate multifamily mortgages are tied to the 10-year, and given the recent increase in long-term rates, these financial instruments are getting significantly more expensive. The average home mortgage rate is nearing 8%. This may serve as a silver lining for multifamily demand, as fewer would-be home buyers are able to afford to purchase homes. However, the increase in both long and short-term interest rates is making it very difficult for multifamily owners to refinance existing assets, many of which carry interest rates far lower than the current market.
Multifamily fundamentals were mostly flat last week, a typical pattern for this time of year. At the market level, weekly growth remains mixed as some metros are enjoying an extended leasing season, while others are declining against a backdrop of heavy supply and soft demand. As this week’s chart of the week demonstrated, all MSAs are losing occupancy on an annual basis, yet roughly 15% of submarkets across the nation have seen occupancy rise over the past year. As our industry slogs through a down cycle, it is important to note that not all submarkets or MSAs will act alike.
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