National Report Q3 2023 - MMG Real Estate Advisors

National 3Q23
Multifamily Market Report

$1,824

average rent

94.6%

average occupancy rate

$54.8B

ytd sales volume

0.4%

YoY rent change

-1.2 POINTS

yoy occupancy change

2,636 YTD

individual transactions

Supply & Demand

3Q23

90,837 Units

QUARTERLY DEMAND
YTD: 184,906

128,130 Units

QUARTERLY COMPLETIONS
YTD: 320,632

Regional Supply & Demand Comparison

West

70,781

36,482

256,444

Midwest

44,040

22,400

101,740

South

178,849

112,736

538,234

Northeast

29,962

13,288

103,269

YTD Deliveries 2023
YTD Absorption 2023
Under Construction

Demand Trends

The third quarter of 2023 marks the third consecutive quarter of positive absorption, with renters absorbing 90,837 units. While this doesn’t match the historically robust demand of 2021, it represents the largest quarterly absorption in almost two years and aligns closely with long-term seasonal norms.

Despite the sustained rebound in apartment demand this year, rent growth has plateaued. This highlights that the current challenges in the apartment sector aren’t rooted in demand fundamentals. Rather, they can be attributed to a significant surge in apartment construction.

Completion Trends

New apartment completions have surged to their highest levels in over 30 years, with over 128,000 units introduced nationally in the third quarter. This surge in supply has shifted the rental market narrative in the past 18 months, transitioning from record-low vacancies and record-high rent growth to more typical vacancy rates and flat, if not declining, rents.

The correlation between supply levels and rent growth is strikingly evident. In the 10 major metro areas experiencing the steepest rent reductions, the rate of apartment supply growth was nearly double the U.S. average. Conversely, in markets witnessing the most substantial rent hikes, the average supply growth rate was below the national average (See table below).

Demand Outlook

While supply will continue to outpace demand in the near term, structural drivers of demand – employment, consumer sentiment, household formation – remain intact for the long term.

Year-over-year, every one of the four Census regions observed a decline in the annual rate of multifamily permitting. The Northeast region, despite being smaller in scale, experienced the sharpest drop of 27.8%, settling at 49,000 units. The South followed suit with a reduction of 21.7% leading to 252,000 units. Meanwhile, the West and Midwest regions recorded declines of 10.2% (totaling 158,000 units) and 9.6% (amounting to 75,000 units) respectively in August.

New Supply Outlook

The latest release from the Census Bureau indicates a notable decline in the multifamily sector. The seasonally adjusted annual rate (SAAR) for multifamily starts in August plummeted 26.3% from July to 334,000 units, marking a 41% decrease from the previous year.

The permitting data indicates a gradual return to market equilibrium between supply and demand within the multifamily industry. As operators navigate the heightened supply over the forthcoming 12 to 18 months, we anticipate a shift towards a more balanced environment. This transition is a promising prospect for both owners and investors.

Market	Existing Units	Annual New Supply	New Supply to Existing Units Ratio	Annual Rent Change
Huntsville, AL	40,903	5,822	14.2%	-1.0%
Sioux Falls, SD	26,621	2,351	8.8%	2.3%
Lakeland-Winter Haven, FL	31,128	2,221	7.1%	-0.3%
Provo-Orem, UT	26,807	1,822	6.8%	-1.8%
Pensacola-Ferry Pass-Brent, FL	26,620	1,784	6.7%	-2.2%
Salt Lake City/Ogden/Clearfield, UT	127,407	7,635	6.0%	-2.5%
Nashville-Davidson--Murfreesboro--Franklin, TN	182,174	10,635	5.8%	-1.9%
Myrtle Beach-Conway-North Myrtle Beach, SC-NC	47,404	2,687	5.7%	-3.1%
Austin-Round Rock, TX	298,266	16,481	5.5%	-4.8%
Charlotte-Concord-Gastonia, NC-SC	223,739	12,346	5.5%	-1.3%
Colorado Springs, CO	55,631	3,060	5.5%	-3.3%
Port St. Lucie/Sebastian/Vero Beach, FL	28,982	1,561	5.4%	0.3%
Raleigh/Durham, NC	188,129	9,855	5.2%	-2.8%
Jacksonville, FL	136,753	7,117	5.2%	-3.6%
Boise City, ID	31,936	1,612	5.0%	-6.3%
North Port-Sarasota-Bradenton, FL	66,086	3,271	4.9%	-3.0%
Wilmington, NC	28,012	1,272	4.5%	-2.5%
Palm Bay-Melbourne-Titusville, FL	40,230	1,703	4.2%	-1.2%
Augusta-Richmond County, GA-SC	31,976	1,310	4.1%	-0.9%
Phoenix-Mesa-Scottsdale, AZ	399,847	16,373	4.1%	-4.8%
Charleston-North Charleston, SC	72,484	2,895	4.0%	3.6%
Greenville/Spartanburg, SC	73,930	2,800	3.8%	1.8%
Madison, WI	77,574	2,792	3.6%	9.4%
Fort Worth-Arlington, TX	231,933	8,329	3.6%	-0.5%
Orlando-Kissimmee-Sanford, FL	265,930	9,532	3.6%	-2.6%
Savannah, GA	32,953	1,147	3.5%	2.0%
Reno, NV	50,115	1,703	3.4%	-2.6%
Atlanta-Sandy Springs-Roswell, GA	560,481	18,708	3.3%	-3.6%
Omaha-Council Bluffs, NE-IA	88,696	2,880	3.2%	5.8%
Chattanooga, TN-GA	33,581	1,068	3.2%	1.1%
Deltona-Daytona Beach-Ormond Beach, FL	38,384	1,168	3.0%	-1.1%
Denver-Aurora-Lakewood, CO	331,167	9,869	3.0%	0.7%
Richmond, VA	113,866	3,315	2.9%	0.3%
Fayetteville-Springdale-Rogers, AR-MO	40,572	1,161	2.9%	4.5%
Harrisburg-Carlisle, PA	36,448	1,028	2.8%	2.2%
Cape Coral-Fort Myers, FL	53,425	1,506	2.8%	-0.7%
Macon/Warner Robins, GA	25,948	723	2.8%	1.0%
Columbus, OH	202,450	5,624	2.8%	2.7%
Naples-Immokalee-Marco Island, FL	31,855	837	2.6%	1.1%
Dallas-Plano-Irving, TX	683,354	17,057	2.5%	-0.5%
Kansas City, MO-KS	184,799	4,525	2.4%	3.3%
Lincoln, NE	34,205	835	2.4%	6.0%
San Antonio-New Braunfels, TX	225,109	5,432	2.4%	-2.3%
Tacoma-Lakewood, WA	63,538	1,529	2.4%	-1.6%
Tampa-St. Petersburg-Clearwater, FL	278,325	6,641	2.4%	-1.3%
Spokane-Spokane Valley, WA	43,731	1,040	2.4%	-1.3%
Minneapolis-St. Paul-Bloomington, MN-WI	324,283	7,696	2.4%	1.0%
Houston-The Woodlands-Sugar Land, TX	753,816	17,131	2.3%	0.6%
Bridgeport-Stamford-Norwalk, CT	60,218	1,345	2.2%	1.7%
Miami-Miami Beach-Kendall, FL	324,529	6,953	2.1%	2.4%
Eugene, OR	25,934	550	2.1%	-2.0%
Washington-Arlington-Alexandria, DC-VA-MD-WV	681,684	14,455	2.1%	1.7%
West Palm Beach-Boca Raton-Delray Beach, FL	126,212	2,625	2.1%	-0.3%
Fort Wayne, IN	28,496	583	2.0%	0.2%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	410,695	8,367	2.0%	1.8%
Stockton-Lodi, CA	31,211	634	2.0%	-1.2%
Indianapolis-Carmel-Anderson, IN	172,973	3,465	2.0%	3.2%
Fargo, ND-MN	37,444	748	2.0%	5.4%
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL	202,992	3,995	2.0%	0.4%
Salisbury, MD-DE	25,015	488	2.0%	3.4%
Greensboro/Winston-Salem, NC	111,758	2,147	1.9%	0.2%
Newark-Jersey City, NJ-PA	556,909	10,588	1.9%	4.9%
Mobile/Daphne, AL	43,263	821	1.9%	3.9%
Asheville, NC	25,474	473	1.9%	1.4%
Des Moines-West Des Moines, IA	55,287	1,024	1.9%	4.4%
Portland-South Portland, ME	28,665	529	1.8%	4.2%
Sacramento--Roseville--Arden-Arcade, CA	157,500	2,811	1.8%	-1.8%
Seattle-Bellevue-Everett, WA	373,254	6,609	1.8%	-1.0%
Santa Rosa, CA	26,588	469	1.8%	-0.2%
Boston-Cambridge-Newton, MA-NH	422,824	7,272	1.7%	3.2%
Milwaukee-Waukesha-West Allis, WI	161,699	2,668	1.6%	3.4%
Cincinnati, OH-KY-IN	167,630	2,760	1.6%	4.5%
Portland-Vancouver-Hillsboro, OR-WA	234,480	3,810	1.6%	-2.4%
McAllen/Brownsville, TX	37,491	587	1.6%	2.4%
Oakland-Hayward-Berkeley, CA	222,020	3,470	1.6%	-2.2%
Trenton, NJ	29,330	458	1.6%	6.0%
Las Vegas-Henderson-Paradise, NV	228,396	3,566	1.6%	-4.3%
St. Louis, MO-IL	170,360	2,628	1.5%	3.1%
Lubbock, TX	25,501	385	1.5%	2.5%
Midland/Odessa, TX	27,492	411	1.5%	15.6%
Knoxville, TN	53,810	788	1.5%	4.5%
Boulder, CO	31,072	454	1.5%	1.5%
Louisville/Jefferson County, KY-IN	97,027	1,413	1.5%	3.0%
Salem, OR	26,052	370	1.4%	1.3%
Fort Collins, CO	23,199	317	1.4%	2.0%
Hartford-West Hartford-East Hartford, CT	90,555	1,233	1.4%	4.3%
Springfield, MO	24,731	336	1.4%	2.8%
Birmingham-Hoover, AL	80,019	1,073	1.3%	-0.8%
Tallahassee, FL	31,787	426	1.3%	0.9%
Wichita, KS	36,582	483	1.3%	3.1%
San Jose-Sunnyvale-Santa Clara, CA	184,986	2,438	1.3%	-1.8%
Baltimore-Columbia-Towson, MD	239,093	3,123	1.3%	0.8%
Allentown-Bethlehem-Easton, PA-NJ	44,341	575	1.3%	2.4%
Albany-Schenectady-Troy, NY	66,442	861	1.3%	5.0%
Columbus, GA-AL	24,738	319	1.3%	4.9%
Dayton, OH	57,218	737	1.3%	3.6%
Vallejo/Fairfield/Napa, CA	29,348	378	1.3%	-3.1%
Corpus Christi, TX	36,761	466	1.3%	0.6%
Oxnard-Thousand Oaks-Ventura, CA	43,886	555	1.3%	1.1%
Manchester/Nashua/Concord, NH	37,838	428	1.1%	3.3%
Gainesville, FL	29,908	320	1.1%	2.6%
Fayetteville, NC	25,452	262	1.0%	1.2%
Grand Rapids/Muskegon/Holland, MI	67,996	685	1.0%	3.2%
College Station-Bryan, TX	26,518	264	1.0%	6.4%
Chicago-Naperville-Elgin, IL-IN-WI	755,834	7,384	1.0%	3.5%
New Haven-Milford, CT	61,310	590	1.0%	3.8%
Memphis, TN-MS-AR	109,857	1,054	1.0%	0.6%
Anaheim-Santa Ana-Irvine, CA	270,186	2,494	0.9%	1.2%
Little Rock-North Little Rock-Conway, AR	56,625	519	0.9%	3.0%
Akron, OH	44,931	410	0.9%	3.3%
Los Angeles-Long Beach-Glendale, CA	1,148,116	10,332	0.9%	-0.6%
Virginia Beach-Norfolk-Newport News, VA-NC	144,227	1,266	0.9%	2.7%
Pittsburgh, PA	148,761	1,246	0.8%	1.5%
Cleveland-Elyria, OH	171,648	1,328	0.8%	2.9%
San Diego-Carlsbad, CA	322,088	2,436	0.8%	1.7%
Kalamazoo/Battle Creek, MI	34,534	258	0.7%	-1.6%
Oklahoma City, OK	101,288	736	0.7%	1.3%
Crestview-Fort Walton Beach-Destin, FL	23,971	170	0.7%	-4.5%
Lexington-Fayette, KY	47,209	324	0.7%	4.5%
San Francisco-Redwood City-South San Francisco, CA	251,915	1,724	0.7%	-2.1%
Riverside-San Bernardino-Ontario, CA	195,663	1,327	0.7%	-1.0%
Salinas, CA	24,360	165	0.7%	1.8%
Worcester, MA-CT	54,079	353	0.7%	0.4%
El Paso, TX	55,721	359	0.6%	3.9%
New York-White Plains, NY	1,931,704	12,168	0.6%	2.3%
Detroit-Warren-Dearborn, MI	279,451	1,728	0.6%	0.0%
Baton Rouge, LA	49,746	302	0.6%	-0.4%
Tucson, AZ	83,936	467	0.6%	1.1%
Albuquerque, NM	56,672	307	0.5%	2.0%
Buffalo-Cheektowaga-Niagara Falls, NY	65,369	353	0.5%	4.1%
New Orleans-Metairie, LA	82,651	341	0.4%	1.3%
Columbia, SC	50,448	206	0.4%	2.5%
Syracuse, NY	42,921	167	0.4%	4.6%
Nassau County-Suffolk County, NY	80,422	282	0.4%	0.5%
Rochester, NY	68,935	233	0.3%	5.2%
Lansing-East Lansing, MI	41,149	122	0.3%	2.8%
Tulsa, OK	70,564	198	0.3%	3.2%
Providence-Warwick, RI-MA	107,756	197	0.2%	4.8%
Ann Arbor, MI	38,464	30	0.1%	2.2%
Urban Honolulu, HI	82,669	51	0.1%	-0.4%
Toledo, OH	45,860	21	0.0%	2.5%
Flint, MI	25,676	0	0.0%	0.8%
Bakersfield, CA	26,154	0	0.0%	1.8%
Fresno, CA	56,600	0	0.0%	2.2%
Shreveport-Bossier City, LA	25,954	0	0.0%	2.5%
Santa Maria-Santa Barbara, CA	28,930	0	0.0%	2.9%
Youngstown-Warren-Boardman, OH-PA	25,413	0	0.0%	4.1%
Jackson, MS	33,001	0	0.0%	4.5%
Champaign-Urbana, IL	27,190	0	0.0%	6.6%
Springfield, MA	46,322	0	0.0%	9.9%

Average/Total	21,130,566	417,535	2.1%	0.4%

Occupancy & Rent Trends

RENT VS OWN
MONTHLY PAYMENT

$3,535

Average Monthly Mortgage Payment

$1,824

Average Monthly Rent

* The Average mortgage payment is based off a median home sales price of $430,000 as reported by the National of Realtors as of August 2023.

Surveying the multifamily landscape on a national scale reveals that the influx of new apartment units is pressuring rent growth; evidenced by the modest 0.4% annual increase in rents during the third quarter. It’s a straightforward case of supply-demand imbalance, especially evident in former rent growth champions like Austin, Atlanta, and Phoenix, now grappling with significant rent reductions as deliveries ramp up. Although the third quarter’s rent growth figure diverged well below the usual seasonal growth trajectory figure, overall demand seems to be normalizing across the majority of the nation. This recalibration follows a brief downturn in the latter half of 2022 when net demand dipped into negative territory. Despite the rental rate reductions year-on-year in markets like Austin, Atlanta, and Phoenix, these areas still showcased robust net absorption in the third quarter, aligning closely with their historical seasonal benchmarks.

It is clear operators are prioritizing maintaining occupancy levels over immediate rent hikes, as supply is increasingly exceeding demand. Add the costs of tenant turnover growing amid tangible financial pressures, tenant retention has emerged as critical strategy in the current moment. This is a marked departure from as recent as early 2022 when rental options were scarce, especially for the mid- to upper-income renter demographic. This scarcity empowered operators to set record-high rents. Yet, the present scenario provides prospective tenants with many more options, shifting the advantage to their side. This changing dynamic underscores the need for operators to adjust their strategies, bearing in mind that vacancies result in no revenue.

Regional summaries highlight this supply impact remarkably well. The lowest supply regions, specifically the Midwest and Northeast, are still maintaining rent growth in line with historic norms. In fact, peering at the top 15 markets for rent growth among the nation’s 50 largest apartment markets reveals 13 markets are located in the Midwest or Northeast, emphasizing the impact supply is having on the apartment market.

Submarket Rent & Occupancy

Market	Average Occupancy	Annual Occupancy Change	Average Monthly Rent	Annual Rent Change
Newark-Jersey City, NJ-PA	96.6%	-0.8%	$2,643	4.9%
Cincinnati, OH-KY-IN	95.5%	-0.8%	$1,364	4.5%
Chicago-Naperville-Elgin, IL-IN-WI	95.3%	-0.4%	$1,964	3.5%
Milwaukee-Waukesha-West Allis, WI	96.8%	-0.5%	$1,527	3.4%
Kansas City, MO-KS	94.9%	-1.1%	$1,302	3.3%
Boston-Cambridge-Newton, MA-NH	95.6%	-0.8%	$2,939	3.2%
Indianapolis-Carmel-Anderson, IN	93.9%	-1.8%	$1,261	3.2%
St. Louis, MO-IL	94.4%	-1.5%	$1,277	3.1%
Cleveland-Elyria, OH	94.8%	-1.5%	$1,231	2.9%
Virginia Beach-Norfolk-Newport News, VA-NC	95.3%	-1.1%	$1,497	2.7%
Columbus, OH	94.8%	-1.1%	$1,321	2.7%
Miami-Miami Beach-Kendall, FL	95.3%	-1.3%	$2,569	2.4%
New York-White Plains, NY	96.9%	-0.9%	$4,476	2.3%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	95.7%	-1.0%	$1,804	1.8%
Washington-Arlington-Alexandria, DC-VA-MD-WV	95.0%	-0.7%	$2,109	1.7%
San Diego-Carlsbad, CA	96.3%	-1.1%	$2,858	1.7%
Pittsburgh, PA	94.6%	-1.3%	$1,512	1.5%
Anaheim-Santa Ana-Irvine, CA	96.5%	-0.7%	$2,810	1.2%
Minneapolis-St. Paul-Bloomington, MN-WI	94.8%	-0.5%	$1,536	1.0%
Baltimore-Columbia-Towson, MD	94.2%	-1.7%	$1,682	0.8%
Denver-Aurora-Lakewood, CO	94.2%	-0.9%	$1,924	0.7%
Houston-The Woodlands-Sugar Land, TX	93.0%	-0.8%	$1,367	0.6%
Memphis, TN-MS-AR	92.2%	-2.5%	$1,219	0.6%
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL	94.5%	-0.8%	$2,449	0.4%
Richmond, VA	94.2%	-1.5%	$1,516	0.3%
Greensboro/Winston-Salem, NC	92.9%	-2.0%	$1,220	0.2%
Detroit-Warren-Dearborn, MI	94.5%	-1.9%	$1,289	0.0%
West Palm Beach-Boca Raton-Delray Beach, FL	94.2%	-0.5%	$2,427	-0.3%
Fort Worth-Arlington, TX	93.0%	-1.5%	$1,421	-0.5%
Dallas-Plano-Irving, TX	93.5%	-1.6%	$1,594	-0.5%
Los Angeles-Long Beach-Glendale, CA	95.3%	-1.2%	$2,813	-0.6%
Riverside-San Bernardino-Ontario, CA	94.7%	-1.8%	$2,237	-1.0%
Seattle-Bellevue-Everett, WA	94.8%	-0.8%	$2,222	-1.0%
Charlotte-Concord-Gastonia, NC-SC	93.7%	-1.3%	$1,602	-1.3%
Tampa-St. Petersburg-Clearwater, FL	93.8%	-1.2%	$1,853	-1.3%
Sacramento--Roseville--Arden-Arcade, CA	94.4%	-1.4%	$1,974	-1.8%
San Jose-Sunnyvale-Santa Clara, CA	95.7%	-0.6%	$3,093	-1.8%
Nashville-Davidson--Murfreesboro--Franklin, TN	94.4%	-1.3%	$1,645	-1.9%
San Francisco-Redwood City-South San Francisco, CA	95.3%	-0.3%	$3,215	-2.1%
Oakland-Hayward-Berkeley, CA	94.6%	-1.2%	$2,618	-2.2%
San Antonio-New Braunfels, TX	91.9%	-2.4%	$1,269	-2.3%
Portland-Vancouver-Hillsboro, OR-WA	94.3%	-1.5%	$1,748	-2.4%
Salt Lake City/Ogden/Clearfield, UT	93.8%	-1.6%	$1,593	-2.5%
Orlando-Kissimmee-Sanford, FL	94.1%	-1.6%	$1,802	-2.6%
Raleigh/Durham, NC	93.6%	-1.4%	$1,563	-2.8%
Atlanta-Sandy Springs-Roswell, GA	92.6%	-1.9%	$1,671	-3.6%
Jacksonville, FL	92.7%	-1.7%	$1,508	-3.6%
Las Vegas-Henderson-Paradise, NV	92.8%	-1.5%	$1,462	-4.3%
Austin-Round Rock, TX	93.3%	-1.6%	$1,650	-4.8%
Phoenix-Mesa-Scottsdale, AZ	92.8%	-1.4%	$1,606	-4.8%

Regional Rent & Occupancy

Region	Average Rental Rate	Rent Change	Occupancy	Occupancy Change
West	$2,238	-1.0%	94.8%	-1.1%
Midwest	$1,396	2.9%	95.1%	-1.1%
South	$1,612	-0.4%	93.7%	-1.4%
Northeast	$2,209	3.3%	96.0%	-0.9%

Region Key

West: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY

Northeast: CT, MA, ME, NH, NJ, NY, PA, RI, VT

Midwest: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI

South: AL, AR, DC, DE, FL, GA, KY, LA, MD, MS, NC, OK, SC, TN, TX, VA, WV

Sales Activity

The peak in apartment deal volume was reached a year ago, in the third quarter of 2022, with August being the pinnacle. A persistent downturn in deal volume has followed since then. Preliminary data from Real Capital Analytics indicate a roughly 61% reduction in deal volume through the third quarter of 2023 compared to the corresponding period in the previous year. A notable hindrance to deal activity has been the negative leverage encountered in new acquisitions. The impact on the sale of individual assets has varied little between property types this year with the mid/high-rise segment recording a 60% year-over-year (YOY) decline, contrasted by a marginally sharper 63% drop for garden style apartments. These broad-based declines emphasize the challenges the investors are facing with market liquidity.

The investment assumptions made in late 2021 and early 2022 were disrupted as inflation propelled interest rates and financing costs higher. The discord between cap rates and mortgage rates persists, and until this dynamic normalizes to a point where leverage augments return, a near-term resurgence in deal volume remains a dubious prospect.

Most Active Buyers (Previous 24 Months)

FPA Multifamily
Cortland
Tides Equities
Harbor Group International
Weidner Apartment Homes

Most Active Sellers (Previous 24 Months)

Alliance Residential
FPA Multifamily
Blackstone
Wood Partners
Crow Holdings

*Most Active Buyers and Sellers are based on the sale volume of apartment units.

TRANSACTION VOLUME

YTD Transaction Volume

Y-O-Y Change

Individual Transaction Count

Price Per Unit

Annual Price Change

* Trailing 4Q average PPU

* Preliminary Data from RCA – Individual transaction $2.5M +

	August 2023 MoM Change (%)	Annual Change (%)
All items	0.6	3.7
Food	0.2	4.3
Energy	5.6	-3.6
Energy commodities	10.5	-4.2
Gasoline (all types)	10.6	-3.3
Energy services	0.2	-2.7
Electricity	0.2	2.1
All items less food and energy	0.3	4.3
Commodities less food and energy commodities	-0.1	0.2
New vehicles	0.3	2.9
Used cars and trucks	-1.2	-6.6
Apparel	0.2	3.1
Services less energy services	0.4	5.9
Shelter	0.3	7.3
Medical care services	0.1	-2.1

Inflation Tracker

The August report from the U.S. Bureau of Labor Statistics described a gradual uptick in inflation, with the Consumer Price Index for All Urban Consumers (CPI-U) marking a 0.6% monthly ascent on a seasonally adjusted basis, a discernible rise from the 0.2% observed in July. Annually, the “all items” index increased 3.7% prior to seasonal adjustment. A substantial portion of this monthly increase was attributed to the gasoline index, which accounted for over half of the “all items” increment. Another noteworthy contributor was the enduring rise in the shelter index, marking its 40th consecutive monthly growth. While the BLS data recorded an upward trajectory in shelter inflation, this was in stark contrast to observations from private data companies, which recorded flat or even declining rents in many markets. This discrepancy is often attributed to a lag in the BLS’ methodologies in capturing real-time market dynamics. The energy index soared by 5.6% in August with all major energy components on an upward trajectory. Meanwhile, the food index kept a steady pace with a 0.2% increase, mirroring July’s figure.

The overarching narrative was one of a persisting inflationary trend, albeit with some indices portraying a more moderated pace. The annual comparison, revealing a 3.7% all items increase for the year ending August as opposed to the 3.2% for the year ending July, underscored a slightly intensified inflationary environment.

Shelter: 7.3%
Services less energy services: 5.9%
Food: 4.3%

Economy

In September 2023, the U.S. job market significantly outperformed expectations, adding 336,000 jobs, doubling the Dow Jones estimate of 170,000. The unemployment rate steadied at 3.8%, slightly above the anticipated 3.7%. This robust job growth, spearheaded by the leisure and hospitality sector with 96,000 new jobs, underscores the U.S. economy’s resilience amid rising interest rates and political challenges. Government and health care sectors followed, adding 73,000 and 41,000 jobs respectively, while the motion picture industry shed 5,000 jobs due to ongoing labor disputes.

Despite the encouraging employment figures, wage growth was muted with a 0.2% rise for the month, and a 4.2% increase year-over-year, falling short of the projected 0.3% and 4.3%. This modest wage ascent amidst a vibrant job market hints at the likelihood of the Federal Reserve sustaining high interest rates to address inflation.

336k

September Annual Jobs Created

3.1%

September 2023 Employment growth

3.8%

September 2023 Unemployment Rate

Top 50 Largest Metros	August 2023 Unemployment Rate (%)	Annual Change (Percentage Points)
Baltimore-Columbia-Towson, MD Metropolitan Statistical Area	1.8	-1.7
Pittsburgh, PA Metropolitan Statistical Area	4.3	-1
Boston-Cambridge-Nashua, MA-NH Metropolitan NECTA	2.7	-0.9
Providence-Warwick, RI-MA Metropolitan NECTA	3.2	-0.9
Cleveland-Elyria, OH Metropolitan Statistical Area	3.7	-0.8
Hartford-West Hartford-East Hartford, CT Metropolitan NECTA	3.5	-0.7
Portland-Vancouver-Hillsboro, OR-WA Metropolitan Statistical Area	3.7	-0.7
Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area	2.6	-0.7
Charlotte-Concord-Gastonia, NC-SC Metropolitan Statistical Area	3.3	-0.6
Birmingham-Hoover, AL Metropolitan Statistical Area	2.3	-0.4
Miami-Fort Lauderdale-West Palm Beach, FL Metropolitan Statistical Area	2.6	-0.4
New Orleans-Metairie, LA Metropolitan Statistical Area	3.6	-0.4
Raleigh, NC Metropolitan Statistical Area	3.2	-0.4
Virginia Beach-Norfolk-Newport News, VA-NC Metropolitan Statistical Area	3.3	-0.4
Columbus, OH Metropolitan Statistical Area	3.4	-0.3
Richmond, VA Metropolitan Statistical Area	3.2	-0.3
Buffalo-Cheektowaga-Niagara Falls, NY Metropolitan Statistical Area	3.8	-0.2
Cincinnati, OH-KY-IN Metropolitan Statistical Area	3.5	-0.2
Memphis, TN-MS-AR Metropolitan Statistical Area	4.4	-0.2
Nashville-Davidson--Murfreesboro--Franklin, TN Metropolitan Statistical Area	2.7	-0.2
Rochester, NY Metropolitan Statistical Area	3.5	-0.2
Las Vegas-Henderson-Paradise, NV Metropolitan Statistical Area	6.1	-0.1
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metropolitan Statistical Area	4.5	-0.1
Seattle-Tacoma-Bellevue, WA Metropolitan Statistical Area	3.8	0
Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area	5.1	0.1
Oklahoma City, OK Metropolitan Statistical Area	3.2	0.1
Orlando-Kissimmee-Sanford, FL Metropolitan Statistical Area	3.1	0.1
Phoenix-Mesa-Scottsdale, AZ Metropolitan Statistical Area	4	0.1
Jacksonville, FL Metropolitan Statistical Area	3.2	0.2
Tampa-St. Petersburg-Clearwater, FL Metropolitan Statistical Area	3.2	0.3
Detroit-Warren-Dearborn, MI Metropolitan Statistical Area	4.1	0.4
Kansas City, MO-KS Metropolitan Statistical Area	3.4	0.4
Atlanta-Sandy Springs-Roswell, GA Metropolitan Statistical Area	3.7	0.5
Indianapolis-Carmel-Anderson, IN Metropolitan Statistical Area	3.4	0.5
Louisville/Jefferson County, KY-IN Metropolitan Statistical Area	3.8	0.5
Milwaukee-Waukesha-West Allis, WI Metropolitan Statistical Area	4.1	0.5
Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area	3.2	0.5
Salt Lake City, UT Metropolitan Statistical Area	3	0.5
Dallas-Fort Worth-Arlington, TX Metropolitan Statistical Area	4.2	0.6
Houston-The Woodlands-Sugar Land, TX Metropolitan Statistical Area	4.9	0.6
San Antonio-New Braunfels, TX Metropolitan Statistical Area	4.3	0.6
St. Louis, MO-IL Metropolitan Statistical Area(1)	3.7	0.7
Sacramento--Roseville--Arden-Arcade, CA Metropolitan Statistical Area	4.5	0.8
San Diego-Carlsbad, CA Metropolitan Statistical Area	4.3	0.8
Denver-Aurora-Lakewood, CO Metropolitan Statistical Area	3.6	0.9
New York-Newark-Jersey City, NY-NJ-PA Metropolitan Statistical Area	4.9	0.9
Austin-Round Rock, TX Metropolitan Statistical Area	3.9	1
Riverside-San Bernardino-Ontario, CA Metropolitan Statistical Area	5.3	1
San Francisco-Oakland-Hayward, CA Metropolitan Statistical Area	4	1
Los Angeles-Long Beach-Anaheim, CA Metropolitan Statistical Area	5.4	1.1
San Jose-Sunnyvale-Santa Clara, CA Metropolitan Statistical Area	3.9	1.2

Market Outlook

The U.S. multifamily market is exemplifying a gradual trend towards stabilization following a period of non-standard trends since the onset of COVID-19. A notable uptick in apartment absorption has been recorded throughout the year, culminating in an annual absorption of 127,000 units—marking a positive shift since the 3rd quarter of 2022. Occupancy rates have stabilized around 94.5%, albeit a slight contraction from the onset of 2023, underscoring a steady reversion towards market normalization. However, rent growth has been restrained, with the influx of new supply serving as the main deterrent. The dampening of rent growth is almost exclusively tied to the strong supply coming online, as evidenced by submarkets with lesser supply influx witnessing more pronounced rent increases. The demand curve is upheld by persistent, albeit decelerating, job growth and improved consumer sentiment.

Venturing into 2024, the supply aspect significantly influences market dynamics with about 1 million apartment units under construction, projecting over 600,000 market-rate multifamily units to complete within the year, marking it as a notable period for apartment deliveries in recent decades. This surge in supply is anticipated to exert downward pressure on rents, embodying a classic economic scenario where excess supply moderates pricing. Nonetheless, a noticeable shift is expected in 2025 and 2026, with a 15% to 20% reduction in supply delivery across major U.S. markets, primarily attributed to a significant reduction in identified starts activity. While occupancy rates are predicted to align with historical norms, staying in the lower 94% range, rent growth in many markets is expected to remain within the 1% to 2% range. The broader narrative for 2024 suggests a stable demand outlook, albeit with moderated rent growth due to the notable volume of new supply.