Freddie Mac: 2017 Multifamily Market Origination Volume at Record Pace

Freddie Mac’s Multifamily Mid-Year Outlook says record origination volume could be in the offing.

Steve Guggenmos and Sara Hoffmann of the company’s Multifamily Research Group said the multifamily market will continue to grow for the rest of 2017 and into 2018. Although the market will continue to moderate from cyclical highs, demand for rental housing units will remain steady. Freddie Mac predicts origination volume is likely to hit another record in 2017, reaching between $270 and $280 billion.

The report cited steady economic growth and strong demand for multifamily units. As a result, Freddie Mac said rent growth is expected to be similar to 2016 levels and vacancy rates will increase more slowly than initially forecast. However, the number of construction projects are expected to peak in 2017 or early 2018, which will push vacancy rates higher. Absorption of new units in some areas will take longer than in prior years, putting some downward pressure on rent growth.

“In the first half of 2017 multifamily performance, by most measures, remained near the historical average in the majority of markets across the country,” said Guggenmos, vice president of research and modeling.

The report noted some larger metropolitan areas, such as San Francisco, New York City, Washington, D.C. and Miami, saw significant construction in the past year, which pushed vacancy rates up and slowed rent growth. However, the report said nearly two-thirds of metros could end the year with vacancy rates below their historical averages. In these areas, demand continues to outpace supply, which allows rents to keep rising.

“All things considered, 2017 will be yet another good year for the multifamily market, Guggenmos said. “And importantly, it will not be the market’s last strong year. Strong demand, fueled by demographic changes and lifestyle preferences, will ensure the multifamily market’s continued strength in the years ahead.”