This is a narration of our weekly Rent and Operating Trends Report.
Fed Chair Jerome Powell gave a very middle of the road speech last week at the Kansas City Fed’s Jackson Hole symposium. The leader of the central bank acknowledged that tightening monetary policy has had its desired impact on inflation, but also warned that inflation may come back, thus warranting further interest rate increases. He neither suggested nor refuted that another interest rate hike would be needed, and the Fed will continue to monitor pertinent economic data before making their next policy decision in a few weeks. Two key data points they will be monitoring will be the Personal Consumption Expenditures Index (PCE) and second quarter Gross Domestic Product, both of which will be released this week. The PCE index is the Fed’s preferred inflation indicator and as of June measured 3.0% growth on an annual basis, just at the top end of the Fed’s ideal range.
Apartment performance continues to decline modestly at the national level. Rents are falling on a week-over-week basis, and leading indicators including traffic and leasing are either flat or negative from week to week. Interestingly occupancy has increased by the smallest of margins in each of the past two weeks, however the slight growth is not enough to indicate a longer-term trend in my opinion. With roughly four months remaining in 2023, key operating metrics will likely continue to soften, but the overall housing shortage and the increasing cost of home ownership will protect our industry from any major declines. Market-by-market weakness will be apparent as new supply is delivered and absorbed.
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