4Q22 Absorption Might Signal a Shift Toward a More Normal 2023

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The pandemic’s impacts including lockdowns, reshuffling migration patterns, and higher variability of lease terms (fewer of the standard 12-month leases and an increase in non-standard lease terms) all informed a disruption of typical seasonal trends. While recent leasing trends have been weaker than operators would hope to see (new lease traffic hit a 10-year low in 4th quarter 2022), the leasing slowdown did introduce the question: “Is seasonality normalizing once again?” In some regards, it appears that is the case. Quarterly absorption tends to dip slightly negative during the winter months, as shown by the 20-year average, calculated by RealPage Market Analytics. But 4th quarter 2021 was anything but normal, as the 4th quarter absorption rate of some 124,000 units ranked as the 14th strongest absorption of any quarter dating back 20 years. The glass half empty perspective can rightfully point out that quarterly absorption has been negative for three straight quarters – the first time in at least 20 years in which that has happened. But a glass half full perspective can equally and justifiably point out that 2021 was an unsustainable trend and the normalization of market trends was inevitable. It appears that signals point toward more normal leasing trends moving forward although the 2nd quarter absorption readings will be a critical indicator of full calendar 2023 performance.