PropTalk: The Entrepreneur’s Journey ft. Carol Enoch

About the episode:

Inhabit IQ’s Elizabeth Francisco sits down with Carol Enoch, CEO of Enoch and Co. and Canary Real Estate Investment, to discuss what being a trailblazer and entrepreneur has looked like on her journey. From leadership and professional development to facing obstacles along the way, Carol provides authentic and encouraging advice for other professionals looking to make their own leaps in life.

Follow Carol on LinkedIn here:

About ResMan: ResMan delivers the property management industry’s most innovative technology platform, making property investments and operations more profitable and easier to manage. ResMan’s platform unlocks a new path to growth for property management companies that deliver consistent NOI improvement and brilliant resident experiences easier than ever before. To learn more about our platform, visit

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The 2022 Performance and 2023 Forecast for Multifamily

In February of 2022, InhabitIQ’s Elizabeth Francisco and ALN’s Jordan Brooks sat down to talk about the 2022 forecast for the economy, specifically within multifamily. Our forecast was officially “sunny with a chance of rain,” as we were cautiously optimistic. As it would happen, some of those rainclouds are beginning to loom a bit more as properties finalize their budgets for the 2023 fiscal year. It’s important to note, however, that this is not frightening or unmanageable, but we invited Jordan back to take a look at the data and give insight into what’s to come and how to prepare for 2023. 

2022 Multifamily Performance 

2022 started off strong, though a bit of a downtick from the peak occupancy rate in October and November of 2021. Last fall, we saw the unusual trend of strong occupancy growth alongside strong rent growth. As we normally see those numbers at odds, this was unusual though it could be attributed to several factors. In the end, we’ve seen occupancy decline since its peak with the seasonal bounce in demand and has only reaccelerated the decline with the slowdown of deliveries this summer. 

Rent and Occupancy for Oct. 2019 to Sept. 2022 

Lease concessions grew until the first quarter of 2021 and have only picked up more recently in the last month or two. You might be wondering if apartment demand has been down, why have we still seen 8.5-9% rent growth year to date? Some of that has to do with bringing high average occupancy into the new year and it’s taken some time to work through that. However, as we are moving into the winter, a lot of that excess occupancy has been used, as we still have 50-80% basis points excess compared to when we went into the pandemic.  

In 2022, we’ve seen monthly net absorption has trailed new supply all year, which is a vast difference from the middle of 2021 where occupancy was clearly outpacing the production of net new units. The decline of demand in 2022 has impacted all assets, however the Class C and D assets have the most pronounced shortfall. 

New Units vs Absorbed Units Oct. 2019 – Sept. 2022 

It’s important to note when we’re talking about how the cost of capital is going to affect development, the net new units that will be available in the next two years have already begun development and broken ground. So, the slowing in development that is currently taking place will affect units that are supposed to be ready in three to five years as those are the ones under planning and financing now. 

What Has Changed & What to Watch 

The multifamily industry had over 600,000 net absorbed units in 2021, leaving many wondering why there was so much demand and how so many new households came about. One reason could be attributed to the “failure-to-launch” age range of 25-34 making a change between 2020 and 2021 as there was a clear decline in this age cohort living at home between those years. This is the first decline since 2005. It’s possible this decline came after many of these individuals found a need for space after the first year of COVID-19. Stimulus payments might have also helped or encouraged individuals to find living quarters of their own. 

Young Adults Living at Home 1990-2021 

Jobs and Labor Market 

Moving to the employment side of the economy, the labor market remains tight although we’ve seen big corporations doing layoffs toward the back half of this year. The demand picture has changed for multifamily but the shoe that hasn’t dropped yet is the softening of the labor force. When that does occur or when unemployment starts to rise, this will affect multifamily and is important to keep an eye on in the future. It’s possible that the markets with a more diversified employment base might be in a better position to weather the storm. 

Sunbelt states saw a big wave of supply and new demand as people moved to these more affordable cities. Some might think that Sunbelt states have lost some of their luster since they’ve seen rent growth and affordability go up since these migrations. On the contrary, while Sunbelt states have seen some of the highest rates of rent growth, the difference is marginal and these cities started at a lower point than other cities. If you compare cities like Orlando and Tampa to Los Angeles and Chicago, the latter has declined since the pandemic whereas Florida cities have seen a robust and inclining labor force since COVID-19. 

Labor Force in Representative Cities Sept. 2019 – Jul. 2022 

US Disposable Personal Income 2000 – 2022 

Credit Card Debt Across the U.S. 

Over the last few months, many of us have heard that Americans had a record amount of money in their bank accounts- something we were not convinced was totally accurate today. Surprisingly enough though, disposable personal income reached an all-time high in 2021. However, it dropped as quickly as it spiked. Disposable income is still higher than it was in 2019. One must wonder how prolonged inflation will impact the health of consumers’ bank accounts. Access to cash and credit is important for our renters as they try to manage through a tightening economy and possible recession, which will certainly impact their housing decisions. 

Most of us have at least some of it, but collectively, we’ve reached a staggering high point when it comes to credit card debt. Americans have accumulated an absolute mountain of credit card debt in 2022 — $887 billion, to be exact. That’s a $46 billion jump from $841 billion in the first quarter of 2022. With the increase, Americans’ credit card debt stands $40 billion below the record set in the fourth quarter of 2019, when balances stood at $927 billion. Thanks to rising interest rates, stubborn inflation and myriad other economic factors, it’s likely a matter of time before credit card balances surpass the 2019 record.    

Average Credit Card Debt from Jan-Feb 2022 Credit Reports 

While credit card debt is growing again at a staggering rate, it is important to note that only 1.81 % of CC accounts are 30+ Delinquents, up from 1.66% in 2Q22.   

Annual Multifamily Absorptions and Renewal Rates 

Renewal rates hit a new record in the first quarter of 2022 at 58.4% before moderating to 56.9% in the second quarter. The higher renewal rates can easily be attributed to the net new lease rate. The rent on a unit vacated and then leased to a new tenant increased, on average, 8.5%. Earlier in the year some markets were as high 18%. Comparatively, a tenant renewing a lease in the same quarter saw an increase in rent of 10.8%. 

At the peak of renewals, the gap between effective and net new rents was around 11%, which equated to built-in rent growth for this current year and made for an attractive offering to investors. If we look at where we are today, the picture looks very different. With Net New lease rent growth slowing considerably, you need to think about your approach to renewal from this point forward, weighing out the turn cost/renewal rent and net new rent.   

Transaction Volume 

The Fed’s use of interest rates to battle inflation is a double-edged sword for multifamily. First, inflation drives up each new unit’s cost, impacting existing and new development projects. New units initially forecasted to come online in 2022 have slowed as GMs have to deal with increased labor costs and materials. Slowing inflation would benefit new development costs.  

On the other hand, with each rate hike, the building & financing of apartments have become more expensive, making it harder for new deals to pencil out.  In addition, some properties have shared that the cost of long-term borrowing has increased significantly since 1Q22. 

U.S. Multifamily Sales Volume, Price per Unit 

CRBE, Freddie Mac, and others are all forecasting the same thing, a slowdown in transaction volume for the remainder of 2022. 2021 was a record year for transaction volume, and 1H22 started off very promisingly. However, the back half of the year could look different than initially forecasted.  

According to Yardi Matrix data, overall national multifamily sales volume surpassed $101 billion in the first six months of 2022, outperforming the $67 billion volume registered in 2021 during the same interval, while the average price per unit rose 28.4 percent year-over-year, to a new high of $218,377. The number of assets that traded also increased, from 2,362 properties during the first half of 2021 to 2,961 in 2022.  

Transaction activity will continue, but capital has become more selective and focused on lower-risk profiles; buyers should be prepared for increased pricing, lower proceeds, higher reserves, or personal guarantees. There doesn’t seem to be much of a path to multifamily having another record number of transactions by year-end.  

Looking Ahead – Q4 2022 & Early 2023 Indicators 

Many are wondering how likely a recession is and if it hits, when that could or will happen. Wall Street Journal predicts by Q4, there is a 63% chance we are heading into a recession in the next 12 months. It’s likely we will see significant signs of this come this time next year. 

Projected Fed Funds Rate 2022-2025 

A few short months ago, the Fed had projected rate increases under 4%. The Fed has raised its projections and now believes interest rates will need to increase to 4.4% by end of 2022, 4.6% by EOY 2023 and don’t expect to cut rates until 2024. Rising interest rates also impact the new development of much-needed units to meet the housing demand.   

Interest rates impact a lot: consumers’ mortgage rates, student loans, auto loans, and credit card rates.  Credit card debt, as mentioned, is already increasing for Americans and all of these things become a contributing factor as renters assess what they can pay for rent.   

Mortgage rates have already gone up from Jan 21 (2.65%) by nearly 300% (current rates sit at 6.9%). We have not seen mortgage rates jump this quickly since 1977 (8.65%)-1981(18.6%). 73% of mortgage borrowers are locked in at rates below 4%, creating an extremely powerful incentive to stay in their current homes long-term.  

You can say the same thing about long-term renters, the rising interest rates reduced purchasing power from 400K down to 274K, keeping the monthly mortgage under 2K at $1,784. What keeps homeowners in place is the same thing that will keep renters in the rental market. As interest rates continue to rise, the home buyers purchasing power will continue to compress, which I think incentivizes renters to also stay put in the rental market. 

Forecasted National Multifamily Trends 

Multifamily New Units, Absorption, Occupancy, and Rent Growth 2000 – 2028 

In the nearer term for 2023 and 2024, new supply will be more active than in previous years and will pressure occupancies downward. In general, a return to 3-5% rent growth is a reasonable expectation as well as completions on the higher end of the scale of what we’ve seen over the last decade. 

Housing Supply Likely to Remain Constrained 

According to the National Association of Homebuilders, the Housing Market Index (HMI) is currently at the lowest point since the early days of the pandemic. While high mortgage rates have helped offset recent multifamily rent growth in terms of comparative affordability, single-family permits, starts and sales are all down year over year. It’s likely we’ll see more buyers and sellers remain on the sidelines for the near term. The good news is the lack of good, substitute affordability should provide some level of support for multifamily demand. 

While there are fears around the looming recession, there are not a lot of new surprises for multifamily in the upcoming months. Ultimately, there’s a lot of data to focus on in the upcoming months as you’re finalizing your budgets for the year 2023. As multifamily saw the Great Recession had much more looming data for the rental housing industry a decade and a half ago, we are cautiously optimistic for the industry for the future.