Economists' Outlook is Positive for Multifamily Demand - RAOT Week of Oct 13th 2024

This is a narration of our weekly Rent and Operating Trends Report.

Economists predict 1.5 million jobs to be added in the next 12 months

At the beginning of each quarter, The Wall Street Journal surveys more than 70 economists on a variety of topics. For the October 2024 results, the group predicted an average of 130,397 jobs to be added per month for the next year, or a total of more than 1.5 million jobs annually. 

The overall average was very consistent with the surveys from the prior two quarters, but there were fewer outliers, particularly on the downside. In the April 2024 survey, two responses indicated more than a million jobs would be lost during the next 12 months. In this month’s survey, all respondents indicated positive growth for the next year, with the lowest at 240,000 jobs added annually.

The optimistic, but conservative, outlook for the job market is positive for the multifamily industry.

Chances of a recession are at the lowest since in more than two years

Based on the same survey, the probability of a recession during the next 12 months ticked down from 28% last quarter to 26% this quarter. It was the survey’s lowest average probability of a recession since January 2022. 

The probability was as high as 63% in October 2022. While the U.S. did not go into a recession, a wave of high-profile layoffs occurred later than year and in early 2023, especially in the tech sector.

In last week’s report, we noted Goldman Sachs recently lowered its chance of a recession to 15%following the strong labor market report.

Interest rates poised to decline again by the end of the year

Finally, more than 80% of the survey’s respondents thought the Fed would cut interest rates by at least 50 basis points by the end of the year. The midpoint of the federal funds rate is 4.875%today. Economists predicted it to decline to approximately 4.4% by the end of 2024 and 3.3% by the end of next year. 

Multifamily Highlights

The national occupancy rate declined to 93.59% last week. While occupancy normally declines in the fall season, it took until late November last year before occupancy slipped to that rate. Based on Radix forecast, U.S. occupancy is expected to be 94.2% a year from now due to sustained job growth and declining supply.

Annual effective rent growth remained at -0.5% at the national level. It is projected to turnpositive by early 2025 and end next year just above 3%. Roughly one-third of the 45 marketspublished by Radix already have rent growth near that range.

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Explore our webpage for more insights and resources:
https://bit.ly/Radix_Website