Multifamily Outlook | January 14, 2019
In our research, we find that performance in the multifamily market remained healthy during 2018, despite high levels of new supply entering the market. We expect this trend to continue into 2019, but with more modest growth in comparison to recent year.
The multifamily market is expected to finish 2018 with solid rent growth and only modest increases in vacancy rates despite an elevated level of new supply. Some weakness in individual markets and submarkets is evident, but the overall multifamily market remains healthy.
New supply will remain elevated through 2019 and into 2020 but rents and vacancies will continue outperforming historical averages due to robust demand related to the rising cost of homeownership, changing demographics and consumer preferences.
Cap rates have fallen slightly over the past few quarters despite rising interest rates, and spreads remain near the long-run average. We anticipate cap rates may rise in 2019 if Treasury rates increase.
Multifamily origination volume is projected to grow to $317 billion in 2019 driven by solid market fundamentals and strong investor demand for multifamily properties. The 2019 figure will exceed the $305 billion in originations estimated for 2018 by 3.9 percent.
We expect 2019 to be another strong year for the multifamily industry. Homeownership affordability constraints and consumer trends will continue to drive demand, while strong rent growth will support property price growth. For more information and analysis, please read our full report.
Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac's Economic & Housing Research group, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac's business prospects or expected results. Although the Economic & Housing Research group attempts to provide reliable, useful information, it does not guarantee that the information or other content in this document is accurate, current or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution. Alteration of this document or its content is strictly prohibited. ©2019 by Freddie Mac.
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