And then of course, as we start to get into the back half of next year, we’ve been through a complete cycle if you will with this pressure and the comparisons to the prior leases and the comparisons to the prior year start to get a little bit more tolerable if you will. So I just think that we feel like that we’ve got call it two or three quarters of this environment. You’ve got seasonal patterns at play here too. You recognize that the Q3 is the point of the year where moderation has typically always occurred anyway from a leasing perspective and then it sort of works through Q4 and then by Q1, particularly, in February and particularly in March things start to pick up and then you get into the spring and the summer and the absorption rate picks up even more.
So I think that to have what we have now happening in one of the weaker quarters of the year from a seasonality perspective and early on in the delivery sort of pressure pipeline I think that it gives us some reason in comfort that by the time we get to the back half of next year the conditions start to change a bit.
Bradley Heffern: Okay. That’s all I have. Thanks.
Operator: We will take our next question from Connor Mitchell with Piper Sandler. Your line is open.
Connor Mitchell: Thanks for taking my question. So you can just discuss the rising labor cost a little bit and maybe that’s especially with third-party vendors. So just thinking about that it’d be fair to presume that your markets are strong economically which would bode well for demand. So thinking about the big picture would it be fair to say that demand and rent growth are healthy enough to offset the rising labor costs?
Eric Bolton: Well I mean the demand is strong, but in terms of revenue growth I mean the problem we’re facing is — or the challenge we’re facing is just a lot of supply in the pipeline right now. And that’s what’s really — that sort of supply-demand dynamic is not as strong as it had been. And so that’s what’s really creating this spread if you — if you will between sort of, rent growth and what we see taking place with growth rate and labor costs. As Clay alludes to we are seeing at least with our own sort of hiring practices that we are starting to see a little moderation begin to show up. And — and we do think that as we get into — and as Brad alluded to we’re seeing a lot of evidence out there with some of the people we talk to various vendors that — and architecture and others would work with on the development side that the construction workforce is starting to have a little bit more availability and it’s not quite as much in demand.
And that to some degree affects our labor costs as it relates to our maintenance operations. So — we do think as Clay alluded to we do think that we likely are looking at some moderation in labor cost from the growth rate that we’re seeing today. We expect some moderation on that as we get into next year.
Connor Mitchell: Okay. That’s helpful. And then maybe sticking with demand. You’ve referenced that demand is really the driving force align supply comes and goes. Could you just maybe rank how bike historically how strong demand is in the pace of demand in this year and maybe heading into the year-end compared to previous years in cycles?
Eric Bolton: Well I mean — Tim you want to add anything to.
Tim Argo: I was just going to make one point that at a high level we’ve done some research and with some of our third-party data as you go back the last five years or so or really, really the last five or 10 years. The highest supplied markets which tend to have been in the Sunbelt have also been some of the best rate growth markets and that’s because of the demand side. So we have historically over the long term demand has more than offset the supply picture. Now we have an elevated supply picture right now that’s put that out of the balance at least for a temporary time. But as we get into late next year and over the long term historically has shown and we believe continue to show all the demand fundamentals show that over the long term that demand outpaces the supply.
Eric Bolton: I can’t tell you compared to, sort of, the migration numbers that we saw kind of throw the COVID years out which were a bit unusual. But the level of net in migration that we see happening right now is still higher than it was historically higher than it was before COVID. And so these Sunbelt markets continue to offer a lot of things that employers are looking for and so that component of the demand cycle I think is better than it historically has been. I will also tell you that the move out to home buying and tailwind that we are getting on demand is a consequence of that have never been this strong either. And so, there are some unique variables out there right now that continue to support demand at a level that is stronger than what we’ve seen historically.
Connor Mitchell: Okay. I appreciate the color. And maybe if I could just sneak one more in. Going back to Atlanta. Did you mention that you’re recapturing some of the units due to the fraud issues? Or would you be able to provide a time line on when you would recapture those units? Thanks.
Tim Argo: Well, I mean it’s an ongoing process. I think what we’ve seen is that for a period from COVID up until really early this year, the counties in Atlanta specifically have been really slow to act or take any action whatsoever. So, we’ve seen that start to accelerate. Horton County is still a little bit of an issue, but [indiscernible] have increased their activities. So we see it starting to happen. But — and I think we’ve gotten through a lot of it but it will continue over the next few months. And I think as we get into later next year, we’re back into more of a normal situation in terms of Atlanta. Like I said, we’ve done a lot of work to make sure we’re not exacerbating the problem by letting any potential fraudulent people coming in the front door.
Connor Mitchell: All right. Great. Thank you very much.
Operator: Thank you. We will take our next question from [indiscernible]. Your line is open.
Unidentified Analyst: Thanks. Good morning. So getting back to the acquisition strategy I think one of the problems over the years is they bought when they should be selling and they’ve sold when they should be buying. So, what you’re saying is interesting. I’m wondering the speed by which this strategy can unfold. You talked about the implied cost of your equity. If you were — your balance sheet is obviously very attractive, but perhaps inefficiently so at 3.4 times debt that leaves $1.3 billion or so of more debt you could put on just to get to 4.5 times. So maybe that’s untouchable now in the rate environment. But I’m just curious you’ve got the amount to finance this. Could this be some sizable activity at this point? Or do you think it will be more like one-off asset by asset like non needle-moving type of stuff for the time being?
Joe Fracchia: Well we hope it will be needle moving. We’re optimistic Rich that there will be certainly more buying opportunity emerging over the coming year. Now having said that, there are a lot of people, with a lot of dry powder right now and I think multifamily real estate is still viewed as an attractive commercial real estate asset class. And everybody understands the need for housing in the country. And I think there’s a more healthy appreciation for the Sunbelt markets perhaps than there has been in a number of years. And so we think that while the opportunity to buy and the transaction market gets better, we think that it will also potentially be pretty competitive. We would hope to — going back to the last recession 2008, 2009, the two years coming out of that downturn.
We bought 7,000 apartments over a two-year period of time. I think — I don’t see that getting repeated, but we do think that the opportunity set will be more plentiful for us going over the coming year than it has been certainly for the last four or five years. In this higher rate environment some of the private equity players are not going to be quite as — be able to be quite as aggressive as they have been. There’s more of a sort of an equilibrium in terms of cost of capital between us and the and the private guys given their higher use of debt. And you’re right. I mean we’ve got a lot of capacity on the balance sheet. We’re anxious to put it to work, but we’re going to remain disciplined about it. But we do think that the opportunities definitely start to pick up and we’re hopeful it will be significant.
