And that — so the — that was probably the only thing that it was. The only thing I can point to that was a bit of a surprise. We expect the demand to remain solid and it is as Tim alluded to our desorption numbers across our markets are really strong. We’ve not seen any moderation on the demand side of the curve. We knew the supply picture. I mean there is no secret about that. We’ve seen that coming for the past year or so. So no real surprises there. It’s really just the behavior of some of these lease-up projects and the motivation that they have to get leased up sooner rather than later. And I think that that goes right back to what I’ve just mentioned is that the recognition that the high rate environment we find ourselves in the interest rate environment is likely to be with us for a while.
And I think it just prompted some actions on behalf of developers to get drop pricing introduce more concessions higher concessions drive down net effective pricing quicker which affected market dynamics to some degree.
Joshua Dennerlein: Okay. I appreciate that color. And maybe just a follow-up on that. If I think through it pretty sure peak deliveries are still in 2024. Is your assumption that this aggressive behavior kind of continues? Because I mean, I would assume that there’s more properties coming online and the interest rates keep going higher they would want to kind of lease up as quick as possible. Do you think this competition gets heavier in 2024? Maybe that’s my question there.
Eric Bolton: It’s hard to say for sure, but the short answer is no I don’t think so. [indiscernible] that is I think that where there is an urgency that’s come into equation and a higher level of urgency by developers. I think to some degree a lot of it may be time to some calendar year-end pressures that they may be thinking about. I think that that perhaps is at play here a bit. When you think about supply levels being where they are, we don’t it’s — of course it varies a lot by market. And we think that — that the supply levels and deliveries that are taking place are likely to be fairly consistent to where they are right now for the next couple of quarters or so call it through Q2 of next year. And so it’s hard to pinpoint it exactly but I don’t think that there is a material change in the supply dynamic that we’re seeing today.
I don’t think there’s a material change in the demand dynamic that we see taking place today. And I think that the only change was if you will just that lease-up pressure that I think some of the developers were feeling given what’s going on with the interest rates. And I think perhaps that there is some at least some of them that are facing some calendar year-end obligations that they’re trying to think through as well.
Brad Hill: Hey Josh this is Brad. I’ll add color in two ways to that. Number one is just remember that developers are incentivized to lease up and sell quickly. Their IRRs are impacted obviously the sooner they sell an asset. And I think partly what’s happened on these projects is according to our math generally they have to be about 90% occupied to cover their current debt service coverage through their cash flow without having to go back to their partner and ask for capital. So, to Eric’s point I think once 10-year hit that psychological level of 4%. It was a realization that sales values are going to be impacted. So the sooner they could get to that point, the better for their IRR calculations and also for the waterfalls in those projects.
So, I think that’s driving to Eric’s point by the end of the year and a quicker process of leasing up to cover debt service coverage and get to the point where they could transact the asset in order to drive higher waterfall promotes to themselves.
Joshua Dennerlein: All right. Thanks guys.
Operator: Thank you. And we will take our next question from John Pawlowski with Green Street. Your line is open.
John Pawlowski: Clay do you expect any notable acceleration or deceleration in the major expense categories throughout the next year?
Clay Holder: We do expect that there will be some moderation in operating expenses going into next year. You saw in the report that personnel costs and repair and maintenance costs were higher than what we had expected or projected but we still do expect those to continue to moderate as we move into next year.
John Pawlowski: Roughly 6% property tax growth rate do you expect it to kind of bounce around this level for the foreseeable future?
Clay Holder: Probably — that will probably moderate a little bit as well as the current environment that we’re seeing with high prices and valuations as those begin to kind of taper down that should work its way through the real estate taxes. And so we expect to see some moderation there as well. How fast that will play through that remains to be seen.
John Pawlowski: Okay. Last one for me Tim. Hoping you can give us a sense for what new lease declines in October look like in a few of the most heavily supplied markets. I’m just curious what the kind of the bottom tranche of the portfolio looks like.
Tim Argo: New lease rates for October — is that what you’re saying John?
John Pawlowski: For the most heavily supplied markets.
Tim Argo: Yes. I mean Austin continues to be the worst and we’ve talked about that for a while. Austin is in the high negative single-digits is our worst market in terms of new lease pricing. We like I said same-store level it’s right around right around 5% for October. Tampa is a little bit higher but also is the one that kind of stands out above all.
John Pawlowski: Okay. Thank you for the time.
Operator: Thank you. We will take our next question from Brad Heffern with RBC Capital Markets. Your line is open.
Brad Heffern: Hey good morning everybody. It seems like the message here is that there are a few weak quarters ahead but the things are expected to get better in the back half of 2024. I’m just curious if you can give more color around what gives you confidence in that timing you do obviously have supply peaking in mid-2024, but it does still look elevated into 2025 and then the lease-ups don’t end when the deliveries fall off. So curious for any thoughts there?
Eric Bolton: Well I think that what I would point to Brad this is Eric is just we continue to see a lot of support on the demand side and the absorption rates that we see taking place remain very healthy. And so I think that all the factors that are sort of supporting the demand side of the business the employment markets, low turnover, solid collections performance, wage growth, all those factors — continued net positive migration trends. All those factors continue to look solid and there’s nothing that we can see suggesting that moderation is set to occur in that regard. I think that as we sort of work through the current pipeline of deliveries that some of the behavior that is occurring right now likely starts to moderate a little bit as some of the more stressed lease-ups get sort of work through the system and some of the developers – one of the most pressure if you will sort of get work through the system.
