Mid-America Apartment Communities (MAA) Q2 2026 earnings call transcript

Thank you, Regina, and good morning, everyone. This is Andrew Shaper, Treasurer, Director of Capital Markets for MAA. Members of the management team participating on the call this morning are Brad Hill, Tim Argo, Clay Holder, and Rob Deltbury. Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements.

Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34-act filings with the SEC, which describe risk factors that may impact future results. During this call, we will also discuss certain non-GAP financial measures. A presentation of the most directly comparable GAP financial measures, as well as reconciliation of the differences between non-GAP and comparable GAP measures, can be found on our earnings release and supplemental financial DAP. Our earnings release and supplements are currently available on the four investors page of our website at www. maac. com. A copy of our prepared comments and employee recording of this call will be available on our website later today.

After some prepared comments, the management team will be available to answer questions. When we get to Q&A, it's be respectful of everyone's time and it tends to convey a call within one hour due to other earnings calls today, we will limit questions to one per analyst. We ask that you rejoin the queue if you have any follow-up questions or additional items to discuss. I will now turn the call over to Brad.

Well, thanks, Angie. Good morning, everyone. Four FFO results were ahead of our expectations with the sequential improvement in new resident and blended lease over lease rates exceeding the prior year sequential improvement. While recovery in new resident lease rates is showing improvement, the pace is slower than we would like given cautious consumer sentiment. As we continue to work through the unprecedented five levels of new supply deliveries over the past couple of years in a few of our high-end concentration markets.

We are seeing solid demand, including job growth, household formation, and population and wage growth. In the increase in inbound migration to our properties in the second quarter was the strongest quarterly increase we have seen since we began tracking the metric, reflecting the broad appeal of our high-demand markets. As a result, units absorbed in the first half of the year significantly outpaced new units delivered.

As demand remains resilient and new deliveries continue to decline, we expect the recovery to expand and accelerate. Additionally, we are benefiting from our scale and operating discipline. We continue to focus on expense control and with second quarter, year over year, same store operating expense growth of just 80 basis points, the teams are excelling in this area. At the same time, the persistent single-family affordability and availability challenges are supporting resident demand for affordable and high-quality rental housing. Two areas where MAA excels. Our customer service focus continues to differentiate the MAA experience, driving increased resident loyalty and contributing to our record low turnover and strong renewal rate growth, improving 50 basis points year over year.

We continue to invest in strategic areas of the business to drive teacher earnings growth, including various new technology initiatives to support our centralization and specialization efforts that will further strengthen our customer service and drive future margin expansion. As Tim will talk about, we are expanding our interior renovation and repositioning programs, which are supported by the new deliveries in our market stabilizing. We are on average the effective monthly rent per unit and new community is over 30% higher than our existing rents, giving us substantial room to expand these highly accretive initiatives.

Our property wide Wi-Fi initiative is in high demand from our residents and is performing well. On the external growth front, the improving demand supply and dynamic combined with the decreased availability of capital for new projects makes disciplined investing in new developments and attractive capital allocation options. In addition to the Kansas City project, we started construction on in the second quarter. We started construction on a project in National Tennessee in July. And next month, we expect to start construction on a project on the land we recently purchased in Northern Virginia.

With one more start later in the year, we are on track to get our four development starts for the year.

The acquisition market remains slow with cap rates in the mid to upper 4% range for high quality communities that fit our profile. But should more compelling opportunities materialize, we have the balance sheet capacity to support growth in this area.

Together, these initiatives reflect a disciplined approach to deploying capital across multiple growth opportunities while maintaining flexibility as market conditions evolve. This same discipline is also evident in our ongoing portfolio recycling efforts, which remain focused on enhancing portfolio quality and supporting long-term earnings growth. In the second quarter, we sold a high-capped 30-year-old property in Raleigh and have two additional properties that should close in the back half of the year, a 42-year-old property in Dallas and are one property in the District of Columbia.

These transactions will wrap up our planned dispositions for 2026. With the track record of successfully navigating economic cycles for over 30 years, we remain confident in our ability to emerge from this recovery period with a stronger, more efficient and higher growth operating platform. We believe our focus on high demand and high growth markets will continue to lead to higher earnings and lower volatility over the full cycle while our investments in a creative growth initiatives are well positioned to deliver increasing value and earnings contribution as the demand supply balance improves.

We are encouraged by the building blocks in place, resilient demand, strong absorption, potentially growing migration trends in a financially strong resident base, all with the backdrop of decreasing supply pressure. As we wrap up July and head into August and September, we see the opportunity for growing momentum and remain confident in our ability to deliver compounding revenue and earnings performance as the recovery continues to accelerate.

To all associates across our properties and in our corporate offices, thank you for your continued dedication and focus during this pivotal recent season. That will turn it over to Council.

Good morning, everyone. For the second quarter, same short, it will be our expectations with continued lower than projected property operating expenses, more than offsetting slightly lower average daily advocacy. Our pricing standpoint, newly sub-release growth improved 170 basis points sequentially from the first quarter, 20 basis points ahead of the acceleration achieved from the first quarter to second quarter of 2025.

As Brad mentioned, newly rates have been slower to recover due to lower super-cintimate and still elevated but moderating new supply in some markets, but we are encouraged by forward-looking trends. Renewal retention rates and lease rates remain strong. Turnover once again moved lower to 39.6% and renewal lease of release rates were 5.2% for the quarter. As a result, blended lease of release rates were up 100 basis points from the first quarter and up 20 basis points from the blended rates at the second quarter of 2025.

Our resident health remains strong as reflected in improvement in our rent-to-income ratio to 18% and continued strong performance and collections with net delinquency representing just 0.3% of bill grants, consistent with what we achieved in the last several quarters. Broadly, our stronger performing markets remain relatively consistent with the last few quarters and we are starting to see some pockets of momentum in other markets.

We continue to see strong performance in Virginia and South Carolina with Norfolk Richmond, Charleston, Greenville and the DC area markets continuing to outperform the broader portfolio from a pricing standpoint. As with last quarter, our two largest concentration markets, Atlanta and Dallas outperformed the portfolio in the second quarter in terms of blended lease of release prices. Austin, though still an under-performing market, showed good momentum that achieved blended lease of release pricing that was 300 basis points better and occupancy that was 40 basis points better than the second quarter of 2025.

Orlando is another improving market with blended pricing up, 130 basis points from the second quarter of 2025. Phoenix, Charlotte, Raleigh and Savannah are high concentration markets for us that are still by continued strong demand.

During the quarter, MAA, Cathedral Arts and Dallas stabilized and MAA applies the Midwood and Charlotte, completed construction and moved into our lease of portfolio.

MAA, Valesto, will officially stabilize in the third quarter, so achieved over 90% occupancy during the second quarter. We moved up the stabilization data of the MAA breakwater and Tampa by two quarters due to strong leasing velocities at ramps well ahead of our performance expectations. We have an additional two properties under construction that are actively leasing. In the supply pressure in Charlotte, our two lease-ups in this market remain the most challenge in the near term, with concessions running up to eight to ten weeks on certain floor plans, but with the overall lease of portfolio, we expect to achieve our under-written yields as markets continue to improve, retaining the expected long-term value creation opportunity.

Inter-like contributions from this group will continue to build through the rest of this year and end in 2027. As Brad mentioned, we continue to accelerate and exceed expected returns on our various targeted redevelopment and repositioning initiatives. During the second quarter of 2026, we completed 2,118 interior unit upgrades, bringing our year to date total to 3,504 units, 30% higher than the number of units renovated in the first half of 2025.

With year-to-day rate increases of $110 above non-upgraded units and average per unit spend of $5,134, the average cash-on-cash return of approximately 25% versus expected returns of 19%. These units continue to lead faster than non-remated units when adjusted for the additional turn time, averaging about 10 days quicker. We would expect further accelerate this program at 2027. For our common area and amenity repositioning program, we have 6 properties that are wrapping up the reprising phase, 5 properties that are just starting the reprising phase, and 6 additional that are in the early construction phase that will begin the reprising phase in the spring of 2027.

The first group is 98% repriced with average cash-on cash returns of 13%. We expect similar returns from the remaining active projects that will look to expand our scope in this initiative in 2027. Our community-wide Wi-Fi initiative that began in 2020 continues to expand. We have 28 live properties where the services rolling out to residents as leases are signed, and we are further expanding the initiative this year to an additional 38 properties.

Resident adoption at the first 28 properties is accelerating, with revenues quickly increasing from 500,000 to 850,000 in the second quarter, and will continue to grow from here. Looking forward to the third quarter, we are encouraged by the early momentum we see in pricing and occupancy, and early signs of potentially later seasonal peak. Our strategic decision to push new lease pricing where possible in late second quarter and into July has allowed us to maintain momentum in renewal pricing and new lease pricing.

Combined with declining supply pressure, strong demand in the broad market level absorption that occurred in the first and second quarters, our crunch sets of subs capture momentum in new lease and release pricing later in the season, and achieve renewal rates consistent with the second quarter and well above what we achieved in the third quarter of last year.

With an assumed backdrop of steady demand, fewer units in weeks of incurred pricing trends continuing, we expect third quarter blended pricing to be better than the second quarter, trend not seen in the last four years, since third quarter blended pricing typically trails the second quarter. That's all I had in the way of preparing comments, now I'll turn the call over to Clay.

Thank you, Sam, and good morning everyone. We reported quarter to quarter with quarter of $2.08 per diluted share, which was two cents ahead of our second quarter diets. The outperformance was driven primarily by continued strength and expense management. The same sort of expenses come again, one and a half cents favorable to our expectations, and then a while from our non-sink store portfolio contributing an additional penny, partially offset by think store revenues that were slightly below our expectations.

As Brad and Tim highlighted, our teams continue to demonstrate an ability to control cost by maintaining strong resident retention and high resident satisfaction. That consistent execution remains a key strength of our operating platform and contributing men, contributing meaningfully to our second quarter outperformance. Repair and maintenance of personnel costs were the primary drivers of our expense variability during the quarter.

We funded approximately $81 million in development and pre-development costs during the quarter. At June 30th, our development pipeline totaled $598 million, leaving $237 million of remaining funding commitments over the next three years. Combined with the two projects that Brad referenced at the starting of the third quarter, our development pipeline will total approximately $804 million.

Looking ahead, we expect to add additional projects to the pipeline here in the balance of the year and into early 2027. Supporting our objective of building and sustaining a development pipeline of approximately $1 billion and reinforcing development as an important driver of long-term earnings growth.

Our balance sheet saw it in a set to support our development pipeline, any acquisitions that may emerge, along with the other growth initiatives Tim discussed. At the end of the quarter, we had over $880 million in combined cash and borrowing capacity under our revolving credit facility, and our net debt-to-ibidile ratio was 4.5 times. At June 30th, our outstanding debt had an average maturity of six years at an effective rate of 3.9 percent.

During the quarter, we continued our measured approach to share repurchases and repurchase 383,000 shares of our common stock at a weighted average share price of $130 and 66 cents for a total of $50 million. In June, we entered into an unsecured delayed term loan with a committed principal amount of $350 million, with $100 million outstanding under the loan at quarter rent.

Turning to our outlook for the year, we have maintained our core PFO guidance and have updated our things for revenue and expired guidance to reflect our current view of leasing conditions for the balance of the year. While underlying demand remains healthy, the pace of recovery and eulies pricing has been somewhat slower than assumed in our prior guidance.

We continue to prioritize long-term revenue performance through disciplined pricing decisions, which we believe support renewal performance and position its will to capture the coming new lease pricing of middle. As a result, we have slightly reduced our expectations for both effective rent growth and average occupancy for the year.

As we update our revenue assumptions for the balance of the year, we also recognize favorable trends developing in other areas of the business. Expense performance has remained strong, driven by continued discipline across our operating platform, lower projected real estate taxes, and favorable anticipated insurance calls given our recent coverage renewal. In addition, our non- thanks to our portfolio continues to perform well with lease up communities performing in line with, and in some cases, slightly ahead of, our expectations in contributing incremental earning support.

In 2026, we project over $25 million in incremental year over year in a while from the properties represented at this portfolio. Collectively, these favorable trends offset the revisions for our revenue outlook and support our maintained full-year corporate midpoint of $8.53 per deluded share. That is all that we have in the way of preparing comments. So Virginia, we will now turn the call back to you for questions.

Yeah. I mean, we will all talk a little bit about what we are seeing in July of Q3, and I think that's really good, you know, driving our optimism as we are starting to see some momentum as we look at the Q3. You know, July itself, we expect, we will be pretty similar in terms of pricing, what we saw on Q2 with occupancy building as we have moved through July and ending in a good spot with July, I could see, but where we see the optimism and where we think we have made the right decision is what we are seeing for August, September.

First, if we look at renewals for the entire Q3, we have retention rates well above, what we saw this time last year, well above, what we saw on Q2, and we are continuing to see renewal rates in that 5 plus range, and we have visibility pretty much into all of Q3 at this point, probably 98% of our renewals, we have liked it at this point, and then when we look at where we stand with new lease pricing and what we have done on the pre-lease side, obviously still more to come than the rest of the quarter, we probably still have about 40% of our new leases or so will still come over the next two months, but when we look at the pre-leaseing for all of us, we are running 7080 basis points better than we were this time last year, and we look at September even running higher than that, so we think with this continued demand, what we are seeing, we volume is up, you know, 70% this time compared to this time last year, there's a volume up close to 10%, so we do think all of these factors lead, which essentially could be a little bit of an extended prime lease at the same time.

Jamie L, I'll just touch on the guide change. I mean, the one thing that, at 10th point, and we're still seeing very strong acceleration as we work into the back half of the year, what I would say is not quite at the same pace, that's what we had initially expected coming into the year, so still seeing the trajectory move in the direction we expected, just not quite to the same pace that we had seen then.

Jamie, not to be left out here, I'm going to add a couple of comments to this one as well, this is Brad, what the guys have said here a little bit, and I think it really starts with what we're seeing on the demand side, in terms of our view for the back half of the year, across the board, we're seeing really good demand really across our markets, and in the markets where we do have heavier supply, you think of a Phoenix, a Charlotte, a Raleigh, Savannah, Nashville, those markets are a little bit more difficult for us right now. We have a bigger hold that we have to dig out of for those, but we are showing progress.

I mean, if you look at our entire portfolio for the second quarter, almost 80% of our markets posted positive blends in the second quarter, so you can see the recovery is pretty broad based. Two-thirds of our markets are showing blends above our portfolio average, so if you look at what is below average for us, a third of our portfolio, those are predominantly some of these higher supply markets. Again, we have a bigger hold that we have to dig out for those, but we're doing it.

On the demand piece, you look at absorption the first half of the year that Tim talked about, second quarter absorption across our markets was 1.8 times new delivery. We're seeing really strong demand, and as we continue through the balance of this year, we certainly believe that more of our markets start to show some of that stronger pricing power, particularly as we look at the blended rates in the third and fourth quarter.

Yeah, this, Tim, to confirm on your under second point, yeah. I mean, we would expect August September pricing to get a little bit better from what we are, but if you think about our full year blended kind of the back half and how we hit our guidance, you know, where we're at, we're at positive point three blended year to date through June and our full year forecast is somewhere in the at the base point range blended for the full year. So with a little more of our piece of skew to the back half of the year, you know, somewhere around 0.6 percent blended is what we're tracking for for the back half of the year and so maybe put that in a little bit perspective, what that would look like from a blended standpoint is our Q3 blended performance to be a little bit better than what our Q2 performance was and then our Q4 performance to look a little bit better than what our Q1 performance was.

So that's that's kind of a way to think about it and it's, you know, the expectation that August September showed the strength that we're seeing right now and then you see a little bit less of a moderation in Q4 based on, again, the demand, the monitoring supply and everything we're seeing and not experience the same level of drop off that we saw in Q4 last year.

Well, thanks, Nick. Yeah, I mean, I think, first of all, what you would have to consider, those four and a half to, you know, call it upper four cap rate range are from the types of assets that we want to buy. So those are brand new assets and some of our higher growth markets, you know, on average what we purchased the last few years have been a one year old, a lot of times in lease up. So that's a little bit different type of product than what we generally are looking to sell. The assets that we have sold this year, the property that we sold, as I mentioned in my opening comments, in the second quarter was an older asset, had a lot of cap X needs, you know, the cap rates that we're getting for those are probably market cap rates are probably in the mid to upper six range on average.

I would say we've got four properties that we're selling this year. You know, those will be in the high fives to low sixes in terms of cap rates. So there's a little different math on what we're selling, but in terms of share buyback here, we've talked about this a lot. You know, our overall focus is about driving long term TSR performance without introducing a lot of earnings volatility. And so it's very balanced. You've seen that in terms of what we've repurchased.

We continue to believe in the merits of putting capital into the development market, into the properties that we are developing the average yield expectation of those with conservative underwriting is still in the six to six and a half percent range. The N and Y margins we've been able to generate from those on average exceeds what our overall portfolio delivers by 50 to 100 basis points. And especially given the fact that, you know, supply continues to be lower than long term averages this year and projected to be that way for the next three years, at least, will be delivering into a pretty strong operating fundamental market. So we continue to believe that's the way that we want to allocate capital for long term TSR performance at the moment.

Yeah, this is Tim. I'll touch on that. So I'm a lease up portfolio. I mean, not really any change in strategy. I mean, we're starting to see some momentum. We're starting to see some good demand. If you look at, you know, some of the properties are lease up portfolio. Nixi gained over 20% of occupancy over the last quarter, Liberty Road over 30%, Plaza Midwood over 20%. So, you know, I think as we're seeing with the broader portfolio, the number of units in lease up and the pressure on on supply is starting to moderate and we're starting to see that with the lease up portfolio.

The two Charlotte assets, the dimension of the ones that are still a little bit behind on in terms of where Charlotte is and supply pipelines. Those are the ones that we're watching. But we've seen really good good momentum with the lease up portfolio, as you mentioned. And then on the broader concession market, not a lot of change, not a lot of change from what we talked about last quarter. If you think about our overall portfolio, you know, broadly four to five weeks is pretty consistent across most of our markets. We are seeing some improving concession activity in Orlando and Charleston are two markets on the point where we're seeing concessions down. And then, you know, Charlotte, Austin are still where, not necessarily up where they've been, but probably the broadest usage of what we're seeing is still in Charlotte and Austin.

But overall, pretty consistent such a picture from what we've seen in the last few months.

Yeah. I mean, the numbers that we could put around that, you know, we saw in migration go from call it 10% in the first quarter to about 13% in the second quarter in that, you know, it's, you know, it's not really one market that we can point to that's really driving that. It was generally an overall increase just in general. So, you know, we have seen absolute levels of migration in migration that's been higher than that, but we've never seen a quarterly increase that's matched that in the past. So, you know, certainly one quarter does it make a long-term trend, but I certainly think in terms of incremental demand components for the business, that's something that we're continuing to watch as we go forward.

Yeah. Awesome. Thank you for your question. We did, I mean, it's a little bit about obviously the renewals are a huge part, and we're seeing, as I mentioned, the retention rates be higher in Q3 than it was both in Q2 this year and Q3 of last year. So, obviously, more of those blending in, and we're running 5% plus, whereas Q3 of last year, we're in the 4.5% range, so that obviously plays a big part. But we are seeing, as mentioned, the momentum on the new lease side as well. You know, with everything, you know, the demand of what we've seen with pre-leasing August, September, new lease pricing looks better than it did at the same time last year.

And then your point about comps as well. I mean, we really saw pricing drop off pretty significantly around this time last year. So, you know, last year, so at August, new lease pricing dropped about 70 basis points, and then August, September dropped 140 basis points, and we don't expect that. To recur this year for all the things we mentioned. But, you know, for July, I expect, well, in July, around 95, 4, in terms of occupancy, and I think the new lease limit pricing probably looks pretty similar to what we reported for Q2.

Hey, Adam, this is Brad. I can certainly pick up on this. I mentioned a moment ago. I mean, you know, our approach is to have a pretty balanced approach about taking advantage of your term opportunities, as well as taking advantage of long-term opportunities to your point. Yeah, I mean, our disposition plans for the year are close to being wrapped up. We have sold two properties. We've got two more that should sell by the end of the year. You know, that puts our proceeds. You know, by the way, one of those properties is in a JV, the one that's in the DC market. But the proceeds we'll get from those will be pretty similar to what we've used so far to repurchase share, so very balanced in terms of how we're looking to allocate capital there.

But our priority continues to be, you know, to invest in our Wi-Fi initiative, which is highly a creative use of capital for us. We're growing our redevelopment and repositioning to drive earnings performance over the next year or so. That initiative continues to perform better as the new supply coming into the market stabilizes with rents that are over $500 a unit higher than our rents on average. That program continues to perform quite well. So you'll see us continue to lean into that as well. Our property reposition continues to be an area of focus for us. So that's kind of the, you know, the prioritization that we have in terms of capital allocation. Clay, I don't know if there's anything you want to add on that.

Yeah, PC mentioned.

Yeah, this is Clay. I mean, as we talked about the past, we do have a journey that's coming to you in September of this year, $300 million. So we've got plenty of capacity with this term along in place with some of these other disposition that Brad had alluded to you that will help cover that maturity. So that's our plan for the financing. It's a good chance that we come back into the market at some point late this year, eventually early next year, as we continue pushing our development pipeline. But that's what we see right now in the next few months.

Yeah. And though this is Tim and I'll touch on the first part of that. I mean, the markets that are performing pretty well, it's generally pretty broad-based. We've talked a lot about the stronger markets here for several quarters. I would say those continue to be broad-based in most of the sub markets. I think where we're starting to see some momentum and some green shoots is some of these improving markets where it's popping up in sub markets. And Austin is a perfect example of that where in some of the near south sub markets, we've seen some of them at them over the last couple quarters. And then I would say even into the second quarter, some of the round rock and even some of the northern assets started to show some momentum where you had some of those properties that were mid to high, single-digit, so out-of-the-basis-point types of improvement in newly-spicing.

And that's where the opportunity lies. And a lot of these high sub markets has as a concession to burn off. That's where you start to see some pretty quick momentum. But still seeing broadly, in our larger markets, more of the urban sub markets do well, particularly in Dallas and Atlanta, you know, the Tampa that's been a little bit weaker. We're seeing some good performance there. And then on the weaker markets, it's more just, it's more broad-based. So Charlotte and Rowley, some of those, you know, they were a little further along in the supply, or a little bit later in the spy pipeline and get a stream amount of supply. So those are ones where, you know, if you have a market that's overall underperforming, it's because we're seeing it more broadly across a lot of sub markets.

I think those are become more of a story as we head in next year.

And now this is Brad. I'll just add one comment there when you're question about the top two-third versus the bottom. I mean, I think in general, what you see playing out there is an indication of our overall diversification strategy, where we are allocated capital between large markets as well as mid-tier markets. And generally, what you'll see on the top portion of that graph, so to speak, or a lot of our mid-tier markets, a higher proportion of those certainly are above the portfolio average. And generally, that's what you would expect right now is they face less supply pressure than some of these other markets, some of the larger markets that you mentioned and we've mentioned. And so the demand supply balance weighs more to the demand.

We're seeing strong demand in those markets. So you see obviously stronger performance out of those right now. And that's what we would expect to occur as demand continues, absorption continues, and some of these more supplied markets like a Charlotte, a Phoenix, a Raleigh, as that new supply continues to get absorbed. But that's what I would say characterizes that breakdown, for some degree.

We talked about it in the past. We do continue to look at new markets and evaluate new markets. And I think certainly the key component of that is we want to maintain what our overall strategy is. And that's allocating capital markets that are have high demand. And if you look across our portfolio, our markets generally have that, particularly when you're comparing to other markets. I don't think we want to go into a market just because it's a low supply market. That's only a benefit to the extent that you have demand. And so we do think over time the demand fundamental is what has the highest impact and has the higher correlation to overall performance. So we'll continue to focus on the high demand, high demand markets that we have.

There are markets that we're looking at that have similar dynamics. Columbus, Ohio, we talked about that before as a market that we've considered, given some of the dynamics there. We want certainly a business friendly environment and low taxes continues to be part of that. But I think it's also important to remember if you look at the demand drivers really across our markets, I think it was in the second quarter, 18 markets across the country showed greater than 1% job growth. 11 of those markets were in our footprint. The only five markets showed greater than 2% job growth in four of those were in our markets. If you look at population growth, whether you're looking at one year, five year, 10 year, 14 of the top 15 markets or MAA markets.

So I think we continue to be in the right markets and continue to allocate capital to the right markets for long-term performance. It has the comment we were making about our markets and the number of markets that are performing above average and are showing positive blended lease rates being so broad, the recovery is coming. And so as the new supply continues to get absorbed in some of these other markets, this high demand that we continue to see will pay off and will continue to see the long-term performance dynamics. I think that we've seen historically that you mentioned at the beginning of your question.

Well, I definitely think developers want to develop. And from the developers that we talked to as part of our pre-purchase platform where we have relationships with the top developers in the country, I would say broadly, we're not seeing an uptick in starts coming. In fact, we continue to find opportunities to partner with those developers on additional projects because their equity partners have backed out of projects. I think the ability to find capital, equity capital in particular for new developments continues to be challenged. And we're not seeing that really change at the moment. I think to your point, permits kind of ebb and flow a bit and the relationship between permits and construction starts can ebb and flow.

But we're not seeing from the folks we're talking to and the data we're looking at, we're certainly not seeing an uptick. If you go back and you look at new starts for the last 13 quarters have trended below long-term averages. So we see that trend continue as we look out over the foreseeable future. We don't see a material pick up from this point right now.

Yeah, this is Brad. I can start to give any other details. I think what we've seen is a very healthy resident, a very healthy prospect. Our rent-to-income ratios continue to be the decline. They're the best that we've seen in a long, long time and 18%. Our collections continue to be really, really strong. But I think in markets where there are a lot of options, there is a lot of supply. We do see folks shopping around a bit more, looking at all their options in the market and taking a little bit longer to make decisions. So we have seen that. I think the good news is even to the point that Tim was mentioning earlier about the momentum we have in August and September, I think in part that does indicate a little bit more optimism from the prospect's perspective as they look out over the next couple of months.

There is a level of, I think, optimism that we're seeing as we sign those releases out for the next couple of months. Tim, anything you'd add to that?

Yeah, there's a point about the impact on New York's pricing. I think for Q2, we did see people just taking longer shopping boards. Brad mentioned our pre-leasing was down a little bit in Q2 relative to last year. That's where they are. I think with people shopping around longer, they're making their decisions later. They're doing more media type of move-ins. And that is kind of the most volatile part of the new lease pricing curve. So I think that played them to Brad's point. We're seeing that change a little bit in Q3. We're seeing a little more pre-leasing and a little more momentum to get this confidence from the rest of the year.

I think this is quite, I mean, what you're seeing here this year is just our continued focus, as you alluded to, our continued focus on controlling expenses. And we've shown a long history of that and a continue to show that even in the current environment. As we look forward to next year, I don't see anything on horizon at this point that would make me think that there are some one-time savings or any one-time large items coming our direction. I would expect next year to look somewhat similar. It could be a little bit higher growth rate just given where we are today. But I would expect generally it would look not too far different than what we're seeing at the moment.

Yeah, this is Brad. I would say broadly, not really. I would say you mentioned the one market that we've seen the most change come up. Regulatory perspective, we've seen it in the bottom, but we only have two properties there, which are our core for us long-term.

But there's certainly some talk in Virginia. I think some of that got pushed off another year or so, the District of Columbia. A lot of things going on in that market. One of us selling our one property in the district shouldn't be exposed to that. So not a lot of change. Just overall portfolio perspective. We still have some markets where we have one asset or two assets, which from a long-term perspective aren't properties that we want to hold. But I would say those markets also continue to do quite well. Another market that we'll have to consider long-term that continues to perform very, very well from a demand perspective. It can get some supply, but demand continues to be really strong.

It's Dallas, but it's also one of our largest markets. That's a market that we could potentially look at adding to and certainly resizing the capital out of longer-term. But the most part, we're not seeing big changes in any market broadly. The Denver component that you talked about, the impact of that is supply and Denver is coming down very, very rapidly. So I think 4-inch will turn around in that market as a result.

Yeah, Alex, this is Clay. Yeah, as we're guiding to, you know, for the, as you mentioned, the total its growth for the year for our savings for portfolios, a little above 1.75%, excuse me. And what we're seeing there, what we're seeing from good benefits there is really across the board. You know, we talked a little bit about repair and maintenance costs, personnel costs that we saw in the second quarter that we're expecting that to continue out through the back half of the year. The teams have done a really good job of controlling those expenses. We've got a full staff which in turn typically leads to lower costs whenever we need to turn a unit and then you've got the increased retention rates, which are clearly moving in our favor.

And so that's helping provide some benefit there as well. You mentioned, and then I'll go back to the personnel costs real quick. We continue to plot some properties, so we are continuing to see some benefit there and expect that benefit to continue on over the course of the year, potentially even into next year, as we look to do more of that.

You mentioned insurance costs. We did have a renewal in July 1st, and it was a very successful renewal. We had premiums that in a total decline by over 12%. As you kind of layer that through what the impact is for this year, for the back half of the year, for the full year, we're expecting a lower over 6% decline in insurance cost year of a year. That marks our third year of reduction in premium and insurance costs. So continue to see really, really good performance from that standpoint. And then the last one I'll call out is property taxes.

Giving just the environment that we're operating in, the NOI decline that we've seen and others have seen in our markets, obviously having an impact on real estate valuation. And so we are getting a little bit of benefit there. We continue to focus a lot on that area. It's one of the largest, you know, is the largest expense line in our, in the stack there. And so we've spent a lot of time focusing on that, making sure that the evaluations that are signed to us are appropriate and pushing back when we need to. So we'll continue to do with that to manage that aspect of it.

Hey, John, this is Brad. I think that's a great example. But I'll tell you for our current pipeline, all that projected in line yields, cash yields on those, is a 6%. I would say today, what are those delivering? Probably close to a 5% yield because of the higher concessions that we have. I would say the good news about that is on the renewals for really across the board of all of our lease up properties. We're getting about 9% to 10% lease over lease increases. All those lease up renewals. So the concessions are burning off, which that's what gives us confidence in our ability to hit those yields that we originally underwrote, which were call it about a 6%.

If you look at a new underwriting that we're doing today for a new project, we think the yields are somewhere in the six and a quarter to six and a half. That will include about 4% or so contingency on construction costs today. We're delivering projects to a 2% to 3% below cost of what our expectations are. That also does include some trending. Generally, what we do is we'll trend rents from today until today's market rents. We'll trend those to the stabilization period, which is three to four years. Somewhere it called in the 2% or so range a year. If you go and look at where we're trending rents versus sub-market expectations, we're normally two, three, four percent below market expectations in terms of rent growth over that period of time.

So that gives you a little bit of a sense of where our revenues need to be or where we're expecting revenues to be versus where the market is expecting revenues to be. I certainly don't think that it's unrealistic to think that from today's market level rents that they would increase a couple of percent over the next four years.

Hey, John, this is Tim. Yeah, I mean, what we're seeing is one, the demand side, the talk about, you know, you know, on the ground, lead volume, visit volume is significantly higher this time, this time, this year compared to this time last year. And, you know, with some of the strategic decisions we made like Q2, I was really geared towards maximizing pricing as we could in Q3. And I think where we're seeing that play out first is on the renewal side as we talked about where, again, retention is higher in the actual renewal rates that we're getting or significantly higher than what we got in Q3 last year. And then we, you know, we spent a lot of time just looking at what our lease and velocity is and what are the leases on the books that we have for Q3 so far, obviously still a lot of time to go with new boot ends of the next couple of months, but when we compare where we are this time compared to the same time last year, you know, the rates we're getting in the August, September, new lease rates are pretty significantly better than, again, the same time last year.

So you combine that with monitoring, supply, you know, the absorption that we saw in the first half of the year, but frankly, with a little bit easier composite at this time last year. So all those factors play into what we're seeing and the momentum that we're seeing and then we expect to play out of the back half a year.

All right, well, one of the comments from us is certainly if you guys have any follow-up questions still free to reach out. Thanks for joining us today.