The forces driving occupancy down have been in place for many months now . Deliveries are outpacing demand . New construction deliveries in 2023 , as well as in the coming years of 2024 and 2025 , will be greater than the best year of deliveries since the Great Financial Crisis , or since 2010 . These elevated delivery levels are poorly timed , as job growth is settling back to a long-term average growth in the 2 % to 3 % range .
The additional demand that multifamily lease-ups once enjoyed from home buyers who became renters due to high mortgage rates has faded . Home builders have reclaimed such demand by buying-down mortgage rates to a sweet spot of 5 %.
Another factor leading to the erosion of occupancy levels in all markets is inexplicable move-outs from Classes B , C and D . Prior to 2022 , these classes behaved in a very stable manner . Higher prices for these product levels could explain the anecdotal scenarios of ‘ doubling-up ,’ or moving back in with relatives . However , there is a bigger , more concerning supply / demand paradigm shift to Single Family Rentals ( SFR ’ s ) that has occurred , attracting renters from professionally managed apartments to this growing SFR Shadow Market .
Current rent growth
Lower occupancy puts rent levels under pressure . Figure B shows two dimensions of rent : one is the annual or 12-month trailing trend by metro , and the second is the nominal change in overall average rent from August to September .
The annual trend statistics , appearing at the bottom of each metro bar , depict a general improvement in rent growth . Ten of the twelve markets , as of the end of September , had shifted their trends in a more positive direction . Austin ’ s rent trend at the end of August was -3.4 % and is now -3.1 %. Another example of improvement is found in Raleigh-Durham where the previous rent trend was 0.4 % and is now 1.0 %. The two exceptions for improvement were in Orlando and Jacksonville , where rent trends moved fractionally more negative .
32 OCTOBER 2023 | WWW . SAAAONLINE . ORG