Timothy P. Argo
Executive Vice President, Chief Strategy and Analysis Officer at Mid-America Apartment Communities
Thanks, Brad, and good morning, everyone. As noted by both Eric and Brad, various demand metrics we track remain strong, partially mitigating the impact of new supply deliveries that we believe peaked in the third quarter. 60 day exposure is better than at any point over the last five years. The seasonal deceleration of Middle East pricing is less than the prior year and pre-COVID periods and absorption remains strong. However, pricing growth particularly on new leases continues to be impacted by elevated new supply deliveries, but as noted showed less seasonal deceleration than we typically see this time of the year. For the third quarter, new lease pricing on a lease-over-lease basis was minus 5.4%, just a 30 basis point decline from the second quarter compared to a 270 basis point decline over the same period last year. In fact, 10 of our top 15 highest concentration markets showed new lease-over-lease growth acceleration from the second to third quarter.
Renewal rates for the quarter stayed strong growing for lease-over-lease basis. These two components resulted in lease-over-lease pricing on a blended basis of minus 0.2%, also a 30 basis point decline from the second quarter and compared to a 220 basis point decline over the same period last year. Average physical occupancy was 95.7%, up 20 basis points from the second quarter, demonstrating the strong absorption in our markets. Collections continue to outperform expectations with net delinquency representing just 0.4% of billed rents. All these factors drove the resulting same store revenue that was in line with the third quarter of 2023. Along with the demand metrics noted, our unique market diversification strategy that Brad mentioned continues to benefit overall portfolio results. As we have mentioned previously, several of our mid-tier markets are holding up better in this higher supply environment. Savannah, Richmond, Charleston, Greenville and our Fredericksburg and our other Northern Virginia properties are all outperforming the broader portfolio from a blended lease-over-lease pricing standpoint.
Particularly in a down cycle, our portfolio balance between large and mid-tier markets helped strengthen overall portfolio performance. Also as has been the case all year, Austin, Atlanta and Jacksonville are markets that continue to be more negatively impacted by the absolute level of supply being delivered into those markets with Austin being the toughest challenge of all the markets. We continue to execute on our various redevelopment and repositioning initiatives, where it makes sense in this elevated supply environment with the expectation of starting to reaccelerate next year. For the third quarter of 2024, we completed over 1,700 interior unit upgrades, achieving rate increases of $108 above non-upgraded units. We are encouraged by the strength of this program in this competitive environment demonstrated by the fact that these units lease quicker on average than a non-renovated unit when adjusted for the additional turn time.
For our repositioning program, we have two active projects that are in the repricing phase with NOI yields approaching 10%. We have an additional six projects underway with a plan to complete construction and begin repricing in the spring of 2025, in what we believe will be an improving leasing environment. As we wrap up, October, we are seeing normal seasonal moderation but are encouraged by demand that should continue to keep the sequential seasonal pricing deceleration better than historical trends. Our 60 day exposure of 6.3% should serve to keep occupancy stable and allow for more pricing power than last year, as we also start to lap new lease pricing that weakened significantly during the fourth quarter of last year. Absorption remains strong in our markets with the third quarter representing the first time since the first quarter of 2022 that units absorbed exceeded units delivered. Therefore, there is not a significant backlog of inventory needing to be absorbed.
Accordingly, October new lease pricing is within 10 basis points of September new lease pricing, demonstrating this demand and our expectation of less seasonal moderation in the fourth quarter than we normally experience. Furthermore, lease-over-lease rates on accepted renewals for November and December in the 4.25 range. We will only reprice approximately 16% of our leases in the fourth quarter, which minimizes the impact of this moderation on the portfolio. As we have discussed over the last few quarters, new supply deliveries continue to be a headwind in many of our markets. However, we still believe the near-term outlook is in line with what we have discussed last few quarters.
That is we expect this new supply will begin to moderate and that we have likely already seen the maximum impact to new lease-over-lease pricing growth and that the supply-demand balance continues to improve from here subject to normal seasonality. At a portfolio level, construction starts in our footprint peaked in mid-2022 and we have seen historically that the maximum pressure on leasing is typically about two years after construction start. That's all I have in the way of prepared comments.
I'll now turn the call over to Clay.