President and Chief Executive Officer at Equity Residential
Thanks Marty. Good morning, and thank you all for joining us today to discuss our fourth quarter and full-year results and our outlook for 2023. 2022 was a terrific year for Equity Residential. We finished the year as we expected, producing same-store revenue growth of 10.6%. We continued to see good demand during the fourth quarter, but certainly saw a return of seasonality to the business. Our strong 2022 same store revenue growth combined with modest expense growth of 3.6% resulted in same-store net operating income growth for the full-year of 14.1%.
With continuing positive financial leverage, this led to a 17.7% increase in year over year normalized FFO. I want to take a moment to thank all my colleagues across Equity Residential, their hard work and dedication in delivering these terrific results. In a moment, Michael Manelis will take you through our 2022 highlights. And now, we expect 2023 to shape up on the revenue side, then Bob Garechana will comment on bad debt and review our 2022 expense results and 2023 expense expectations, as well as recent balance sheet activities, and then we'll take your questions. We have provided guidance for same store revenue growth at a midpoint of 5.25%, which would make 2023 another good year for Equity Residential and produce same-store revenue growth well above our long-term average.
We do admit to finding 2023 harder to predict than usual. On the positive side, we go into the year expecting to benefit from embedded growth of about 4.2% from leases written in 2022, and we also carrying into the year and above average loss to lease, both of which will contribute to positive momentum for us, particularly in the first half of 2023. We also feel-good about the employability and earnings power of our affluent renter customer. There's still appears to be plentiful employment opportunities for the highly-skilled workers that form the bulk of our residents, as evidenced by last week's blow-out January employment and job openings reports. We saw big increases in employment in the professional and business services category, a smaller gain in financial activities and only a modest decline in information services, all big employment categories for our residents.
So-far the announced layoffs at tech and some financial firms, while certainly creating a negative environment, have not manifested themselves much in the government's reported numbers or thus far in our internal numbers. We've only seen a handful of residents terminating leases early due to job loss. Possibly, the impact is delayed due to severance and other factors, but it is at least equally possible that the workers in these categories have been quickly reabsorbed into the job market. Our renter demographic has proven resilient in the past and we expect them to continue to be highly employable. As to renter incomes according to the Atlanta Fed wage tracker, college graduates wages accelerated in the fourth quarter, outpacing wage gains achieved by hourly workers despite the higher base. Looking at competition from home ownership and new apartment supply in 2023, we also generally see a favorable picture. Home ownership costs and down payment requirements remain high in our markets, especially relative to rents, making our product better value.
According to the National Association of Realtors, for their affordability index to return to pre COVID levels, one of three things we need to occur, the 30-year mortgage rate will need to decline to 2.6%, home prices to fall by one third or family incomes to increase by 50%. This is all very consistent with our internal data, which shows the percentage of residents leaving us to purchase a home fell to 9.4% in the fourth quarter from 15.8% a year ago. On the apartment supply-side, we expect 2023 national new supply to run at record levels, but we generally feel good about the direct level of competition that we will face given our market mix and importantly, the location of supply within markets relative to our properties.
The Sunbelt markets including the Dallas Fort Worth, Austin and Atlanta markets in which we are increasingly investing and Denver, you will see higher relative supply numbers than our coastal established markets and likely more impact, especially if that's coupled with the job slowdown. In terms of supply in our coastal established markets where we still have 95% of our properties, our internal research indicates that new apartments delivered near to our properties, create significantly more short-term pressure on our results. As we look at 2023's expected deliveries through that lens, new supply within close proximity to our properties in our coastal established markets is actually forecasted to be below pre-pandemic levels with only the Washington, DC and Orange County market screening as delivering above-average supply close to our properties relative to these pre-pandemic supply averages. And over the next decade. The significant net deficit of housing across the country sets us up for good long-term demand. We do however fully acknowledge that despite what was good GDP growth in the fourth quarter and full-year and continuing strong employment reports, the Federal Reserves rate actions are likely to pressure job growth and economic growth as 2023 progresses.
We took this into account in our guidance by assuming a lower rate of rental rate growth during 2023 than usual, and a decline in occupancy, but whether there is or isn't in a technical recession is a considerably less importance to us than whether job growth substantially declines and if so, when. A decline at the beginning of our spring leasing season will be considerably more impactful than a slowdown later in the year. We also now expect that the elevated post pandemic level of bad debt in some of our California markets does improve in '23, but at a slower rate than we had previously hoped as poor public policies encouraging delinquency continue. Bob will discuss all of this in a moment. In sum, we make no prediction about a recession, but have assumed some impact to our 2023 results from a job slowdown and flawed government policy on evictions, while continuing to see sources of strength in our business in the form of modest forward competition from home purchases and new apartment supply. The high employment ability of our residents even if the job market deteriorates from its current lofty levels and the positive forward momentum from our strong 2022 Results.
On the transaction front, there was not much activity in 2022 for us. We only purchased one deal and we sold three others do in New York City and one in Washington DC. We did start a handful of new developments these were mostly in our tool joint-venture structure. As we head into 2023, the transaction markets remain unsettled. But we see higher than usual supply in the Sunbelt in Denver markets in which we wish to expand as buying opportunities for us later in the year. For now, our guidance does not assume any acquisition or disposition activity, but remain committed to our strategy of shifting capital out of California and New York and Washington DC and into our expansion markets of Denver, Dallas-Fort Worth, Austin and Atlanta, as well as the suburbs andmarkets like Seattle and Boston, assuming appropriate opportunities present themselves. And with that, I will turn the call over to Michael.