Tom Toomey: Yeah, Jeff. I guess the positive is clearly what you’ve seen headline wise with starts dropping very dramatically here in the last couple of months of down kind of 50-plus percent, which someday will be a positive as we get into the fundamental picture probably in the 2025. As we look at 2024, it looks like we’re going to plateau in the first half of the year. There’s really not that much of a divergence within our different regions. There’s clearly some markets that start to look a little bit better than others. But regionally, they’re all kind of hitting in that first half of the year. That said, it’s not going to be a cliff in the second half. You’re going to start to see a dissipation in deliveries, but then you still have to deal with plus or minus 12 months to get through the lease-ups.
And so those lease-ups are going to take place into 2025. So we’re not going to say that 2025 is going to be the panacea for multifamily. But I think when you start to see the light at the end of the tunnel, some of these more extreme levels of concessions probably start to roll off and you have a little bit more rational pricing as you move through the back half of 2024 and into 2025. And so we’re going to be dealing with it for a while, but 2024, clearly, we’re still facing at 25% probably starts to look a little bit better for us.
Operator: Our next question is from Nick Yulico with Scotiabank. Please proceed.
Nick Yulico: Thank you. Yeah. I just wanted to go back to, I guess, the original guidance on revenue growth and what it is now and just understand what changed. I guess in terms of sort of the second half of the year here, was the original guidance assuming that you wouldn’t have as much typical back half of the year, seasonality pressures and you’re assuming better pricing and occupancy in the back half of the year, and that’s why now you’re — you face some issues on both of those items?
Joe Fisher: Yeah. Hi, Nick, it’s Joe. So good question. One, we’ve obviously spent a bit of time on here in the last 30 to 45 days. So it’s probably helpful to go back a little bit to July when we last confirmed guidance and talk about kind of what we had been experiencing at that point in time as well as kind of what we expected here in the second half of the year. And so yeah, in terms of experience, we’re sitting there in July with six-plus months of sequential rent growth kind of up 4% through the first part of the year. That was pretty normal with historical trends in both in terms of absolute level, but also seasonality. We are seeing increased levels of supply, but we are still seeing pretty normal concessionary utilization.
We still have pretty sticky occupancy, sticky renewals. And so we had a pretty stable environment, it felt like even in the elevated supplies we were sitting there in July. And so back half of the year, we expect a kind of a continuation of that in terms of yes, we do supply was going to keep picking up, but we thought that developers will continue to act rational and we wouldn’t see a material increase in concessionary activity. We definitely thought that the first half performance of our Bs in those more heavy supplied markets. We’re going to keep outperforming days, which Mike talked to that reversal a minute ago. And we really did believe that given we’ve seen normal seasonality in the first half of the year, that easier comps when we went into that September time period that we talked about previously, we thought we were coming up on the easier comps and that would definitely help as we move into 4Q.
So when you kind of rolled it together, we expected plus or minus 3.5% blends coming here through 4Q. What we talked about upfront was we’re starting off the first part of October at around 1%, which we hope kind of continue at that level through 4Q. And so we end up with about a 2.5% divergence that 2.5% on our revenue is roughly $0.02. That’s kind of two-thirds coming from the broader supply commentary across all markets. And so just to increase concessions East, West and Sunbelt and about a third of it is kind of the AB phenomenon. And so it kind of breaks up the change that occurred. Obviously, we’re not happy about it. We’ve got a really good track record historically of consistently delivering on the guidance that we put out there. So it’s probably a little bit on this room here on the call of we were a little bit too optimistic 10, 12 months ago when we put that together.
That said, definitely don’t want it to mask what the operations team is doing and kind of track from what our goal here is, which is relative results. And I think, at least to date on third quarter, when you look at the five of us that put out results, I think Mike and team and the rest of the ops team should be really proud of what they’ve done in a relative sense. Yes, you look at revenue, I think in the quarter, we’re number one sequentially and year-over-year, year-to-date. I think we’re number one or two on both revenue and NOI. We’re number two on year-over-year AFFO. And so overall, I think the relative piece still holds. We’re proud of what we’re doing on a relative basis. And I know blends get a lot of focus to. And we’ve seen deceleration in blends on an absolute basis, we’re probably slightly lower than some of the peers, maybe 50 bps, 100 bps, but it does mask a little bit of the occupancy strategy that we’ve had because our occupancy has been holding better than peers, keeping that relatively static.
At the same time we’re driving other income, which is why those revenue numbers look good. So it kind of gives you a summation of where we are at, where we’re at today, but also want to refocus everybody on what we’re doing on a relative basis.
Nick Yulico: Okay. Yes. Thanks for that Joe. Just one other question then is on if you have what the full — the new full year blended rate growth assumption is, I think last quarter, you said it was 2.5%. And then for 2024, there was some commentary earlier that rent growth would be below the long-term average of 3%. I wasn’t sure if that was also referring to like a blended rate growth number?
Joe Fisher: Yes. So kind of the update for this year is roughly 2% on blends down from that $2.5 million, so that 50 bps kind of for the full year equates to that kind of 2-plus percent delta that we’re seeing in 4Q from 3.5% to down 1%. And that as it relates to 2024, the comment really has to do with we’re seeing decent earn-in as we go into next year, approximately 1% earn-in as we head into 2024. So, slightly below the long-term average, but still a pretty good jumping off point. We do expect other income as it typically is to be additive to the number. But we do expect that, all else equal on the third-party forecast on demand, which, obviously, those can move around. But at this point in time, it looks like demand may be a little bit weaker next year at the same time that supply on the margin is a little bit higher.
And so blends will probably be a little bit below the long-term average, if they’re typically plus or minus 3.5%. This year, we’re putting up 2%. So, we’ve got 75 days to kind of work towards that, see what the market gives us on the supply and the demand front and then come out with guidance next year, but we don’t expect it to be an above average year as it relates to revenue growth.
Operator: Our next question is from Austin Wurschmidt with KeyBanc Capital Markets. Please proceed.
Austin Wurschmidt: Great. Thanks. Do you guys expect any of your markets to have negative market rent growth next year, maybe more importantly, negative blended lease rate growth? And then on the flip side, any regions or markets you think could exceed that long-term average of 3% in 2024?
Joe Fisher: Hey Austin, it’s Joe. I think it’s too early at this point in time. We’re going to look at it at a portfolio level and then also a ground-up level when we come through the budgeting process. And so there’s probably going to be outliers to either side ultimately win another five, 75, 90 days to get through our budgeting process, get into next year and then come out in late January, early February and talk to you guys about what we’re thinking.
Austin Wurschmidt: That’s fair. And then how far along are you in backfilling kind of the skips in the VIX? And I guess I’m just curious how you kind of shape up the additional risk in the quarters ahead. Some of your peers have recently started discussing some similar issues that they’re seeing.
