Oil near $100 could give New Mexico a lift.
Albuquerque investors should pay attention.

The labor market came in stronger than expected—and that is a mixed signal for multifamily.

U.S. employers added 162,000 jobs in August, well above the 31,000 average monthly gain over the prior year. Unemployment stayed at 4.1%, labor-force participation improved to 61.6%, and June and July payrolls were revised upward by a combined 55,000 jobs.

For apartment owners, stronger employment is fundamentally good news. People with jobs are more likely to pay rent, form households and renew leases. Construction and manufacturing also added jobs in August, while information employment fell. That is a reminder that this is not a universally strong economy, but it is stronger than the July headline initially suggested.

The complication is interest rates. The Federal Reserve held its policy rate at 3.50%–3.75% in July, but three policymakers voted for a quarter-point increase. After the August jobs report, market pricing moved back toward a greater-than-even chance of a September rate increase. The Fed meets September 15–16.

Inflation is the deciding variable. July consumer prices were 3.4% higher than a year earlier, and the Fed’s preferred PCE inflation measure was up 3.7%. August CPI arrives September 11. If inflation stays high while employment remains solid, the Fed has more room to keep rates restrictive or raise them again.

Lenders are active. Buyers are still price-sensitive.

Commercial and multifamily lending increased 16% from a year earlier in the second quarter, according to the Mortgage Bankers Association. Multifamily lending alone rose 8% from a year earlier and 15% from the first quarter. In plain English: lenders have money available, and more loans are getting done.

That does not mean buyers are accepting every asking price. Apartment sales fell 16% year over year in July to $12.4 billion, according to MSCI data reported by Multifamily Dive. Single-property sales fell 25%, while the trailing 12-month average apartment cap rate increased about 10 basis points to 5.6%.

A cap rate is the property’s annual net operating income divided by its price. When cap rates rise, buyers are effectively demanding more income for each dollar they invest. All else equal, a higher cap rate means a lower property value. That is why a market can have improving occupancy and still feel difficult at the negotiating table.

For owners: a functioning lending market expands the pool of potential buyers, but the buyer still has to make the debt payment work. Well-documented income, believable expenses and a clean rent roll are more valuable when financing is expensive.

For buyers: more lender competition is useful. Compare banks, agency options and private lenders carefully. A small improvement in rate, amortization or proceeds can materially change the price a deal can support.

The national supply wave is finally losing force.

Yardi Matrix reported on September 4 that U.S. advertised apartment rents increased again in August, the sixth consecutive monthly gain. Its main conclusion is more important than any one rent number: slowing construction and resilient renter demand are helping the market absorb the large supply wave that pressured rents over the last several years.

CBRE’s second-quarter data tell the same story from a different angle. U.S. multifamily net absorption—meaning the net increase in occupied apartments—was 167,000 units, compared with 77,700 new completions. Demand exceeded new supply for the second consecutive quarter, and all 69 markets CBRE tracks posted positive absorption.

This does not mean owners suddenly have unlimited pricing power. National rent growth is still modest, and markets that built too many apartments continue to use concessions. What has changed is the direction of the supply cycle. Fewer new units are arriving while renter demand remains positive.

The local operating numbers remain the strongest part of the story.

There was no new Albuquerque apartment-market release this week, so the most current local benchmark remains Colliers and RealPage’s second-quarter report. Occupancy was 95.9%, up one percentage point from the first quarter. New-lease effective asking rents were still down 0.7% from a year earlier, but that decline was much smaller than the 2.3% drop reported in the first quarter.

The supply pipeline is also moving in the right direction. Albuquerque delivered 813 units over the year ending in the second quarter, but only 574 units remained under construction, with 336 expected to complete during the next four quarters.

For owners: 95.9% occupancy suggests the market is absorbing recent supply. The next test is whether operators can reduce concessions and translate that occupancy into better effective rent growth.

For buyers: a smaller forward pipeline makes the future income story more credible, but I would still underwrite today’s actual rents. If rent growth returns, it should improve the deal rather than rescue it.

The local job market is soft, but Albuquerque keeps adding higher-value demand drivers.

Albuquerque had about 416,000 nonfarm jobs in July, essentially flat from a year earlier. The preliminary local unemployment rate was 5.5%, up from 4.9% in June. Local monthly labor data can be volatile, but the message is clear enough: Albuquerque is not currently experiencing broad-based job growth.

That makes new private investment more important. On September 3, biopharmaceutical manufacturer Curia opened a new high-speed vial filling line as part of a $200 million Albuquerque expansion. The project is expected to create more than 250 jobs with average salaries above $50,000.

I would not count 250 announced jobs as 250 new apartment leases. Projects take time. Some workers may already live here, and others may choose housing outside Albuquerque. Still, a growing bioscience employer gives the local economy more variety beyond government, defense and the national laboratories. That can strengthen the renter base over time.

What this means for a deal: use cautious job-growth assumptions for the next year. Over the longer term, Albuquerque’s growing mix of bioscience, aerospace, defense, quantum and energy employers deserves some credit.

New Mexico’s stronger cushion adds support to improving apartment fundamentals.

Four events could change the deal math quickly.

1. Producer prices · September 10

Producer inflation measures the prices businesses receive for goods and services. A hot reading would reinforce concern that inflation pressure is still moving through the economy and could keep bond yields elevated.

2. Consumer inflation · September 11

August CPI is the most important data release before the Fed meeting. A cooler number could ease rate pressure. A hotter number, especially with oil near $100, could strengthen the case for another rate increase.

3. The Federal Reserve · September 15–16

The Fed’s decision will directly affect short-term rates and may also move longer-term rates. Its comments about future inflation may matter as much as the rate decision itself.

4. Albuquerque rents, concessions and employment

The next local test is whether 95.9% occupancy begins to improve effective rents and whether local employment stabilizes. Those are the two signals that would make the Albuquerque income story materially stronger.

The market is improving. The financing still has to work.

If you are considering an Albuquerque apartment purchase or sale, I can help test the numbers. We can compare current rents, expenses, financing, nearby competition, recent sales and new supply.