DALLAS-Though the September, 2012 unemployment figure of 7.8% created some buzz (especially in advance of the general election), October figures from the Bureau of Labor Statistics opened even more eyes, stating as it did, that 171,000 new jobs were created in October (above the forecasted 140,000-145,000). Even more interesting is that, despite the increase in jobs and downward creep of unemployment (7.9% in October), the apartment sector is seeing some softening.
Annual rent growth in October was 3.54%, with year-to-date rent growth, through October, at 4.32%. Occupancy also moved down somewhat to 94.4% in October (versus 94.5% in September).
But not to worry, comments KC, Sanjay, senior economist for locally based AXIOMetrics Inc. Much of the slowdown is seasonal. Furthermore, “building-wise, we haven’t seen a surge of new supply yet,” Sanjay points out. “It takes a little time for new construction to come online. We’re about 70 to 80 basis points below the historical average.” He predicts that new construction will ramp up during the next couple of years, and the historical average will likely be passed by the second half of 2014. However, “we won’t suddenly see thousands of unit coming into the market,” he says.
Though the multifamily sector softening is somewhat seasonal, Sanjay acknowledges there are some areas that are getting a little overzealous when it comes to adding new units to the market, specifically, parts of the Houston area and Dallas’ urban core. Developers are flocking to the urban core for projects, he says, though they’ll spread out to the suburbs during 2013-2014.
Meanwhile, the top five performers for annual effective rent growth (YTD) are
- San Francisco; 95.8% occupancy; 9.3% annual effective rent growth
- Oakland; 96.8% occupancy; 7.2% annual effective rent growth
- San Jose; 95.7% occupancy 7% annual effective rent growth
- Houston; 93.1% occupancy; 6.9% annual effective rent growth
- Denver; 95.3% occupancy; 6.5% annual effective rent growth
But any kind of multifamily sector support depends on one thing: jobs. And Sanjay tells GlobeSt.com he was surprised when he saw the total number of jobs added during October. Part of the issue, he explains, is that the BLS revises frequently; it’s not uncommon for the agency to go back and release different figures after the fact. Even with this, Sanjay says the number of jobs added was interesting, especially in light of economic uncertainty and the general election.
The top five annual job producers during October were:
- New York (+113,500)
- Houston (+95,800)
- Los Angeles (+57,800)
- Boston (+46,900)
- Dallas (+43,900)
Is this the beginning of new jobs coming online? It’s true that businesses are sitting on approximately one trillion dollars and they’re reluctant to invest because of uncertainty about the economy. Sanjay points out that the economy will depend on whether Congress can agree what to do about the fiscal cliff. And even if that’s navigated, there are still headwinds. The European economy remains a huge question mark as does the single-family housing market. Still, AXIOMetrics is predicting approximately 1.8 million jobs for 2012 and 2.1 million new jobs coming on line in 2013, along with a 1.6% growth. “We’re saying that the fiscal cliff will be resolved and money sitting on the sidelines will finally come in,” Sanjay comments.
|This chart, courtesy of AXIOMetrics,compares jobs growth to multifamily occupancy and effective rent growth. Though San Francisco wasn’t the top creator of jobs in October (that distinction went to Houston), it did boast the highest effective rent growth.|