Equity Residential: Hooray for Higher Mortgage Rates

Multifamily giant envisions a strong 2024 due to borrowing costs in the for-sale market and quality-of-life improvements in major cities


Equity Residential (EQR) could not be happier with the housing market right now.

Fewer than 8 percent of the multifamily giant’s 2023 move-outs cited “bought a home” as a reason, CEO and President Mark Parrell said Wednesday during Chicago-based Equity’s fourth-quarter earnings call. 

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“Overall, with low unemployment and rising real wages, our target renter demographic remains in good shape,” Parrell said, also noting the generally strong U.S. economy buoying the financial prospects of tenants and prospective tenants. “They are likely to rent with us longer as the prospect of homeownership in the near term seems less likely with scarce inventory and relatively high mortgage rates.”

That is, of course, a direct result of the cost of buying a home (and of the general lack of available housing inventory nationally, which Parrell also noted). Mortgage rates are down from spikes in 2022 and 2023, but economic forecasts predict the 30-year  fixed-rate — the most popular borrowing vehicle for homebuyers — will stay above 6 percent through 2024. It was about half that as recently as early 2022. 

And what do folks do for shelter when they can’t buy? They rent, of course.

Equity is one of the biggest multifamily landlords around. It owns or has investments in 302 properties with 80,191 apartments, according to its website. Those holdings are concentrated in major markets such as the Boston area, New York City, the San Francisco Bay Area, Southern California (including 14,732 units in Los Angeles) and the D.C. area, where it has the most of any of its markets at 15,028 apartments. 

Equity’s positive earnings results caused its stock price to jump 3 percent Wednesday afternoon.

The company saw particular rent growth in Boston, D.C. and New York, according to the earnings call. In general, too, it enjoyed a decent fourth quarter due to those housing trends. Executives also noted drops in crime in these and other markets as well as what Parrell described as renewed “quality of life and energy on the street.” 

Equity reported $727.5 million in revenue from rental income in the fourth quarter, up 4 percent annually. The company clocked total revenue of more than $504.6 million, a 1 percent uptick from $495.6 million the year before. Equity said its occupancy was at 95.8 percent, the same as the fourth quarter of 2022 and very similar to the third quarter. 

The company said that more than 50 percent of its existing debt does not mature until after 2030, and there are no debt maturities until mid-2025. Executives also said they were not spooked by new multifamily supply anticipated in 2024, which could temper any rent increases. In Boston and New York, for instance, where Equity has a combined 15,706 units, new supply is expected to be the same as in 2023, according to Chief Operating Officer Michael Manelis.

Manelis echoed Parrell’s praise of the market fundamentals underlying Equity’s recent success. That is, there’s just steady demand because tenants are priced out of the sales market. “Turnover in the portfolio remains some of the lowest that we have seen in the history of our company,” Manelis said, “and we expect that trend to continue in 2024.”

Tom Acitelli can be reached at tacitelli@commercialobserver.com.