Ric Campo: Yes. So on the challenge – where do you have the most challenge on maintaining occupancy? It’s in the markets where we knew that we were going to have a challenge in the fourth quarter with our supply impacted markets. So it’s Atlanta. It’s Austin. It’s Charlotte. Those would be the big three in terms of kind of a compounding of both supply that we did anticipate and then kind of continued elevated lease breaks, which we did not anticipate.
Haendel St. Juste: Great, guys. Thank you so much.
Ric Campo: Sure.
Operator: Our next question comes from Austin Wurschmidt with KeyBanc Capital Markets . Please go ahead.
Austin Wurschmidt: Good morning. Thank you. You guys referenced a couple of times that only 16% of the communities are being impacted by new supply, but clearly new lease rate growth has dropped dramatically, occupancy has fallen as well. I guess, is it your belief that 4Q is as bad as lease rate growth and occupancy could get and that we actually see both rate growth and occupancy reaccelerate into 2024? Just given some of the items you highlighted around the impact from seasonality skips and evics, et cetera, and I guess, what would change that view?
Ric Campo: I think the issue will be what happens in 2029 with the economy overall, right? I mean, if we continue to have robust job growth like we’ve had so far, and we know we had seasonality this year more than we’ve had since the pandemic. Then you would expect to have a similar pattern – similar seasonal pattern in the first quarter of 2024, which is very typical, where you have the slowdown start in September, October, you bottom in January, and then you start moving up in February, March, April. And I think that is very plausible and it really just depends on the strength of the economy and the consumer still has a fair amount of savings. And you look at consumer spending, it was very robust in the last number that came out and I think the PCE today came out pretty strong, where people are actually spending more than wages that are rising.
And so the consumer continues to be pretty resilient. And assuming that you have a reasonable construct for 2024, you should have a pickup in leasing and occupancy levels like we have had every year before the pandemic.
Alex Jessett: So Austin, I would say that, of the three things that we’ve highlighted and talked about supply, bad debts and skips and evictions. On supply, there’s – we’re going to have the challenge in 2024 that’s similar to what we’ve had in 2023. The number of deliveries that are coming is going to be about the same in Camden’s market. But from our perspective, we have already lived in that environment now for almost a year or nine months or so. And it’s in our run rate. I mean, if you stratify our portfolio between impacted and non-impacted, the differential is in the second and third quarter was somewhere around 300 basis points between those two groupings of assets impacted and not impacted. The ones that are impacted now are probably going to continue to be impacted in 2024.
So I think the good news is, from the standpoint of as an operator, that’s in our run rate probably going to stay there at least through 2024. In terms of bad debts and skips and evictions, I mean, we still have a very clear expectation that this is a process of kind of cleansing the COVID and the bad behavior that came as a result of all the regulatory construct during COVID. But there’s no reason to me that we would expect bad debts to continue to be as elevated as they are right now or expect to be in the fourth quarter. I mean, if you just go back to the 27 or 28 years of this portfolio prior to COVID, our bad debt averaged 50 basis points a year forever. And then all of a sudden in COVID, it peaks at 200 and then we start making progress.
We think that we’re on a glide path to get to 90 basis points by the end of the year, and lo and behold, we’re not. But I still have every expectation that this is a process of unwinding a lot of bad behavior and a lot of bad actors. And I do think, we obviously thought a lot more of that would happen in 2023. But I think that’s a continuing process that probably gets wrapped up in 2024, the same on skips and evictions. Skips and evictions are double the level that they were in our portfolio prior to COVID. And again, we’re probably going to have some bad behavior. We’ve talked some renters, some really bad habits over the last two and a half years. Maybe it stays a little bit elevated from what it was, but I can’t see it being double what it was pre-COVID throughout 2024.
So I think that those two will work their way out in 2024, but the supply challenge is going to be with us in 2024. But I think we’ve captured that already, most of that in our run rate.
Austin Wurschmidt: Got it. Thanks for the thoughts. And that’s my one question.
Operator: Our next question comes from Eric Wolfe with Citi. Please go ahead.
Eric Wolfe: Thanks. I just wanted to follow-up on that last answer. I guess, I’m trying to understand what you think would sort of change from a sort of process perspective to sort of get the bad debt down, whether it’s sort of external or internal, because it feels like we’re pretty removed with COVID at this point. And to your point, it’s super easy to just kind of look up ways to get out of leases now and it’s sort of embedded in people’s mentality. So is there anything like you think you can do on an internal perspective? Maybe there’s some warning signs for the recent skips and evictions, like a common factor or something that you found with them. Just trying to understand what would bring that down from the 150 basis points or 140 basis points that you’re running at as you’re thinking about guidance for next year, I guess. How would you come up with an estimate for bad debt, just given all this noise that you’re seeing now?
