Cynically, residential rentals represented one of the most compelling prospects for opportunistic investors, which could explain the rise of Camden Property Trust (US:CPT) following the doldrums of the COVID-19 pandemic. At the most basic level, people must live somewhere, making CPT stock powerfully relevant. However, recent fissures in the consumer economy implies the good times may be slowly coming to an end.

In fairness, many individuals took advantage of the accommodative monetary policy that the Federal Reserve implemented during the initial response to the global health crisis. With each dollar losing relative value under a dovish framework, real estate investments made much logical sense. Unfortunately, not everyone had the means to advantage the unique backdrop of the pandemic.

Further, as the Fed began hiking the benchmark interest rate to combat skyrocketing consumer prices, would-be homeowners increasingly found themselves priced out. First, homeowners were reluctant to sell, having refinanced their mortgages at ultra-low rates. Second, the rise in borrowing costs imposed backend affordability problems for prospective buyers.

Forced to Rent

With few to no options available, many people had to rent, which played into Camden’s core business of ownership, management, development and acquisition of multifamily apartment communities. To no one’s shock, demand soared, with Camden posting $1.42 billion in revenue last year. However, cracks are now developing in the real estate investment trust’s armor.

True, in the first quarter of 2023, the REIT posted revenue of $378 million, up 21.5% against the year-ago period. When stacked against the same property, revenue increased 8% on a year-over-year basis.

Although seemingly encouraging, Camden’s occupancy rate in Q1 2023 was 95.3%. In contrast, the occupancy rate in Q1 of last year stood at 97%. Moreover, in Q4 2022, the rate landed at 95.8%. Put another way, the same people that were priced out of buying their homes may be getting priced out of renting them.

Revealing Options

Tellingly, Fintel’s screener for unusual stock options volume reveals a contested environment for CPT stock. Following the close of the June 27 session, call volume hit 275 contracts against open interest of 254. These stats compared relatively evenly with put volume of 268 contracts against open interest of 414.

Overall, options sentiment for CPT stock is bearish, with the put/call ratio standing at 1.62. Since puts generally represent bearish wagers, a ratio greater than 1 indicates pessimism.

Fundamentally, with the unemployment rate rising and the number of peope without employment for 15 to 26 weeks soaring, the backdrop for Camden and the apartment REIT industry appears much more muddied than it did during the early years of COVID. Plus, with companies continuing to lay off workers, investors must take a cautious approach with CPT stock.

This article originally appeared on Fintel

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