3 Things: Successful Asset Stabilization; Potential for Q3 Rate Cuts on the Horizon; Positive Outlook for Multifamily Investors
“You just can’t beat the person who never gives up.” – Babe Ruth
MAY EDITION
01 Jara Capital’s Successful Asset Stabilization and Commitment to Excellence
We are proud to announce the continued stabilization of our assets, achieving 100% occupancy
and 100% on-time rent collection. Our success is driven by effective property management,
attracting and retaining strong tenant profiles, and a disciplined capital management approach
to control expenses and explore value-add opportunities to enhance property value.
Additionally, we are committed to maintaining our properties by building a team of experienced
professionals dedicated to property upkeep and improvement. Our team's growth and steadfast
commitment to excellence ensure that we consistently provide exceptional returns for our
investors and memorable experiences for our tenants.
We remain focused on our core values of excellence and continuous improvement, striving to
deliver the highest standards in property management and tenant satisfaction.
02 Inflation Eases Slightly: Potential for Q3 Rate Cuts on the Horizon
In April, inflation eased slightly, with the Consumer Price Index (CPI) rising by 0.3% from March and 3.4% year-over-year, aligning with expectations. Core inflation, excluding food and energy, also met forecasts at 0.3% monthly and 3.6% annually, marking its lowest annual increase since
April 2021. Despite the moderation, inflation remains above levels that would prompt immediate
interest rate cuts by the Federal Reserve. Notably, shelter and energy costs saw significant
monthly increases of 0.4% and 1.1%, respectively. In other economic news, retail sales were flat
in April, indicating consumer spending is not keeping pace with inflation. Markets reacted
positively, anticipating potential rate cuts by September. However, Fed officials signal a cautious
approach, requiring more evidence of sustained inflation reduction before making policy
changes.
Our Key Takeaways
The slight decline in the inflation rate to 3.4% year-over-year is a positive development for investors, indicating potential relief from rising costs. However, it remains above the Federal Reserve's 2% target. If this trend continues, it could lead to rate cuts in Q3, aligning with JP
Morgan Wealth Management's advice to their clients. Investors should monitor these
developments closely, as lower interest rates could create favorable conditions for real estate
investments and broader market opportunities.
03 Positive Outlook for Multifamily Investors as Occupancy Rates Rise
Nationwide apartment occupancy rates increased to 94.2% in April, marking the first rise since early 2022, indicating a potential market rebound. This growth was consistent across all U.S.
regions, following a robust Q1 with over 100,000 units absorbed. However, despite improved
occupancy, rent growth remained modest due to an oversupply of new units. While rents grew
slightly in the Northeast and Midwest, they fell in the South. RealPage predicts subdued rent
growth throughout 2024. Market dynamics are returning to seasonal norms, with late
spring/early summer showing heightened demand. Investors should note regional variations, as
some previously strong Sun Belt markets show weakness, while Midwestern cities lead in rent
growth. Starwood Property Trust's CEO, Barry Sternlicht, anticipates stronger multifamily rent
growth by 2025 due to a slowdown in new construction and emphasizes the need for diversified
investment strategies amid current economic challenges.
Our Key Takeaways
The rise in occupancy rates signals positive momentum for the multifamily sector. Investors should note that the increased market supply from 2023 and 2024, which contributed to flat rent
growth, is expected to taper off by the end of this year. This reduction in new supply could set
the stage for a strong 2025. As market absorption of new units continues through 2025, fewer
new construction projects are anticipated, given the decline in permits and project cancellations.
We may be approaching a bottom in rent growth and peak supply, leading to a favorable
forecast for the multifamily market. With these conditions, increased investor activity and
acquisitions are likely heading into 2025. Investors interested in multifamily properties should
prepare for upcoming opportunities for attractive acquisitions.
Ready to invest?
As you evaluate your 2023 strategic investment plans, Real Estate is and will always be a solid asset class for investment. Jara Capital is well positioned to help anyone looking to invest some capital in the multifamily real estate sector.
Regards,
Caleb & Toyyib
Co-founders & Managing Partners
Jara Capital Partners “Delivering Extra”
