April PCE, REIT Updates, & Approving New Leases

release edition [022]

read time [8 minutes]

Welcome to The Multifamily Download, a weekly newsletter where I provide institutional insights to help you build an exceptional Multifamily career.

Today at a Glance:

PCE: April Update
REITs: Q1 Updates
Leasing: Tenant Screening
Weekly Listen: The Rent Roll

Some public praise for The Vault...

PCE

One of the Fed's favorite inflation and economic indicators is PCE, or Personal Consumption Expenditure.

It's a measure of the total spending by consumers on goods and services in the United States. Essentially, it's how much money households are spending on current consumption instead of saving for the future.

PCE is important because consumer spending accounts for 65%+ of overall economic activity.

Yesterday, it was reported that April PCE beat expectations with very favorable data:

The personal consumption expenditures price index, the Federal Reserve’s key inflation measure, increased just 0.1% for the month, putting the annual inflation rate at 2.1%.
Core inflation also was at 0.1% for the month though it was higher on an annual level at 2.5%.
Consumer spending, though, slowed sharply for the month, posting just a 0.2% increase, while the savings rate surged to 4.9%, the highest in nearly a year.

Additionally, personal income was up +0.8% in April, which crushed the market's expectation of +0.3%. Personal income growth has been positive in each month of 2025, and has increased by a combined +2.7% YTD.

The graph below illustrates the continued strength in rising DPI, or disposable personal income, in 2025.

Honestly, this data is both surprising and encouraging. I've written much about a looming recession and the underlying risks that are likely embedded in today's economy, but the hard data (i.e. PCE data above and DPI graph below) continue to show strength in the face of uncertainty, including the likes of sour sentiment and low consumer confidence.

Links to Articles Below:

Bureau of Economic Analysis: Here
CNBC: Here
Yahoo Finance: Here

REITs

A Real Estate Investment Trust, or REIT, is a company that owns and operates income-producing real estate, or finances real estate, and allows investors to participate in the real estate market through publicly traded shares.

REITs typically generate income through rental income and property sales, and they are required to distribute a significant portion of their taxable income to shareholders in the form of dividends.

Below are several interesting updates from some of the Q1 REIT earnings calls.

1. Macroeconomic Uncertainty

Despite continued strength, macroeconomic uncertainty is weighing on the minds of many. As a result, guidance and outlooks were largely unchanged. REITs are taking a 'wait and see' approach.

From Essex's Angela Kleiman: "With our solid performance today, under normal circumstances, Essex would consider revising our guidance upward. But lack of clarity on the US and global trade policy have led to macroeconomic uncertainty, including the impact on business investment and job growth..."

2. Financial Strength

Many reported few or no signs of weakening financial health among market-rate renters. Additionally, demand held steady, and was seasonally strong for the 1st Quarter of the calendar year. I found this surprising, and I'm not sure how this trend will evolve throughout the remainder of 2025.

3. Low Turnover

In simple terms, residents are staying put, which is not surprising. I've written about this previously, but in the face of uncertainty, the default decision is often inaction. And in the case of rental housing, inaction means staying put.

EQR's Michael Manelis said EQR's turnover number "set the record for the lowest that we have ever reported. This is a continuation of a very favorable prior trend and supports the strength of our centralized renewal process and intense focus on delivering our residents a quality experience."

4. Minimal DOGE or Tariff Impacts

Despite conventional wisdom that DOGE, layoffs, and/or tariffs would obliterate the D.C. market fundamentals, that has not been the case thus far.

Camden's Ric Campo: "We are seeing absolutely zero anecdotal information about DOGE and the negative effect that I think some people think it's going to have on the D.C. market. As a matter of fact, D.C. continues to be really good, high occupancy, very good new lease rate growth and renewal growth."

5. REITs Want to Be More Active

Generally speaking, REITs want to invest in markets and opportunities today that present compelling risk-adjusted returns with limited capital risk.

Despite the dislocation that is beginning to present itself in the market today, these opportunities have not come en masse, so there's strong competition for desirable product, which drives up pricing and eliminates the pricing inefficiency that many buyers (REITs included) are targeting.

NexPoint's Bonner McDermett: “For quality assets, those are getting bid up. We were in a process on the deal we liked in Las Vegas ... We put what we thought was a very compelling offer out there and got outbid."

Now, I will add that these highlights should be taken with a few grains of salt.

First, every REIT has incentive to color their commentary with rosy colors as they are all inevitably "talking their book", or trying to communicate in such a way that they benefit from the way the information is being conveyed.

Secondly, past performance never equals future success. Unfortunately, much of this data is now history, and may not inform how the future will unfold. The economy in 2025 is shifting rapidly, and there's no telling what the remainder of both Q2 and 2025 may have in store for consumers and renters alike.

Links to Articles Below:

Leasing

Multifamily owners and property managers work hard to generate more leads and higher traffic that generate more leases and higher property income.

Money is spent on payroll, online marketing, offline marketing, follow-up systems, community events; the list goes on.

So what happens when a prospect finally decides to apply and comes back as "conditionally approved"?

This moment is a critically important one that is worth examining and evaluating carefully.

First, let's set the stage: How is it determined if an applicant is qualified or not?

While the specifics listed below will differ among owners, here are the general market standards:

Income-to-rent of 2.5x or greater
650+ credit score
Positive rental history (no evictions)
Positive rental references
No criminal record
Verifiable income documents

When a resident has some, but not all, of the above then they may be conditionally approved.

As an owner or property manager, should this prospect get approved to actually lease a unit at the property?

My answer: It depends.

While there's no one-size-fits-all approach, here are a few of my thoughts after enduring my fair share of evictions, skips, and chronic late payers from an asset management standpoint.

1. Rental & payment history matter more than credit score.

I know that our society has glamorized 800+ credit scores, but the reality is that some folks are carrying high balances on their credit cards for more reasons than just their inability to service the debt.

For example, I know someone that earns multiple 6-figures per year on a stable W-2 and carries a 0% interest credit card balance of $50K+. Why? Because cash earning 4-5% in T-Bills generates more income than paying off 0% interest debt. The trade off? Their credit score has suffered.

But, with the right documentation, I am a believer that a low credit score is something that can be explained. Evictions or chronic late payments cannot.

2. References are Underutilized

Does it take more effort to call references? Yes. Can you learn about the character and nature of a prospect by doing reference checks? Also yes.

If you're unsure if someone should be approved, ask them for references and call the names they provide. I know it might feel awkward, but asking questions like "How was the unit condition when they moved out?", "Did you have to chase them down to pay rent?", or "Were they a benefit or detriment to the property while they lived there?" can reveal a ton of great insights about the type of resident that this prospect will be if they live at your property.

3. Co-Signers Are Better Than Denials

Finding a willing and able prospect can be challenging in markets with high supply and softer rents. Rather than denying a conditionally approved applicant, consider asking them if they can get a co-signer for the lease.

I know this can create added layers of risk and documentation, but vacant units can become expensive quickly as they pile up. Finding a win-win solution for a prospect should be every owner and property manager's goal. This is a highly commoditized customer service business, after all.

There's no right or wrong way to navigate conditional approvals, so long as Fair Housing Laws are considered and followed.

Choosing and balancing an effective leasing strategy is important, especially for properties that have both (a) strained operations (elevated skips/evictions and low occupancy, and, (b) a more at-risk resident profile (lower income earners = fewer discretionary dollars).

Weekly Listen

This week's listen is Episode 34 of The Rent Roll hosted by Jay Parsons and joined by guest Alfonso Costa Jr., who has held both public roles as the deputy chief of staff at HUD and COO for an active nationwide developer.

In this episode, Jay initially dives into his take on the recent REIT earnings calls and updates. Later, Alfonso shares his unique perspective on housing as someone who has served in senior roles in both the public sector and private sector — and offers up thoughts on what could help move the needle again on housing creation.

You can listen to the full episode here.