What's happening with inflation and rents?

Disclosure: This is not financial advice or a recommendation, and not a substitute for due diligence. 

Originally tweeted on May 11, 2024

Mid-America Apartment Communities Inc (NYSE:MAA)... this is in line with the FED's thoughts that you get slowing rent inflation. But you're still getting some rent inflation. 

Context: MAA has properties in the suburbs. It's still mostly multifamily though and they will benefit even if you do get multifamily real estate transactions or new developments fall out of bed, since they are primarily operators, and benefit from tighter supply.

Image 1 (Q1 2024 Operating Results): MAA reported Revenue +2.6%, but this image is the more relevant one. The fact Net Income is up tells you that any asset sales they made during the Q were above cost. 

Image 2 (Same Store Results): This is the money shot for what happened (See image 3).  Even with expense increases, NOI is down only ~0.7% and you have an up +1.5% return on rent.  ALSO, occupancy is 95% reflecting extremely low supply.  In case the turnover freaks you out, that is actually low for them. They are in the suburbs after all. 

Image 3: This is good color. You did get reduction in new leases (meaning you reached a peak in rents if you leased in Q3 or Q4). Realize though you are still seeing increases at lease renewal. Hence for macro people, this will STILL show as rents going up in CPI.

For real estate folks, this means MAA is cool if you vacate b/c old leases are still at lower rents than new leases.  Hence, supply is still tight but has improved. AND you can see they've started projects to add on supply.

Realize this is market-specific and part of why I review all of the S&P 500 real estate every quarter.  

Finally, they guided to the high end of the range. Multifamily Real Estate is still fine.

Link to tweet: https://x.com/marketswithmay/status/1789276466900856944