Freddie Mac Forecasts Continued Multifamily Growth in 2022

Loan originations could hit $500 million, according to the GSE’s forecast.

Freddie Mac’s latest multifamily market forecast is projecting continued growth for 2022, albeit at a much more moderate pace than in 2021.

The 2022 Multifamily Outlook report noted that demand for existing multifamily properties will remain strong, following the second and third quarters of 2021 that saw the highest levels of demand ever recorded. Alongside growing demand, Freddie Mac’s report also said there were more permits and construction starts recently, adding that community completions should also remain high.

According to property data and analytics company REIS, rent growth for 2021 is expected to be near a record-breaking 10 percent, with the vacancy rate falling to 4.8 percent. For 2022, Freddie Mac is projecting the vacancy rate to remain flat at 4.8 percent, while rent growth will be seen in all 74 U.S. markets that the organization covers.

Rent Growth Across the Board

Steve Guggenmos, vice president of Multifamily Research & Modeling at Freddie Mac, said in prepared remarks that the organization is expecting rent growth in all markets in 2022 due to strong demand that’s driven by the improving economy.

Chart and data courtesy of Freddie Mac

The metros that are expected to see the highest rent growth for 2022 include Phoenix at 8.2 percent; Tampa, Fla., at 7.7 percent; Las Vegas at 7.4 percent; and Tucson, Ariz., at 7.1 percent. According to the report, the top 10 markets expected to overperform in rent growth are the secondary and tertiary Sun Belt markets on the West Coast and in Florida.

On the other hand, markets with the weakest projected rent growth are mostly in the Midwest or the northeastern portion of the U.S. Places like the suburbs of New York City and Milwaukee are expected to see the lowest rent growth, which is roughly 2 to 2.5 percent, for 2022. The Northeast and Mid-Atlantic markets are also expected to see some drops in vacancy rate, like in Washington, D.C. and Boston.

More Investment Than Expected

Alongside rent growth, Freddie Mac is projecting originations for the multifamily market to also continue growing, hitting between $475 billion and $500 billion in 2022 and building off the momentum from 2021. The organization originally projected in its mid-year report that 2021 would see between $385 billion and $410 billion in originations. However, Freddie Mac has since adjusted that figure and is expecting originations for the multifamily market in 2021 to end up at $450 billion, which is also an increase from the $360 billion mark in 2020. The growth in total origination volume is expected to continue for 2022 considering the current strength and demand for the multifamily market, just at a slower rate of roughly 5 to 10 percent.

Chart and data courtesy of Freddie Mac

Overall, Freddie Mac’s 2022 multifamily forecast noted that strong economic conditions and unprecedented levels of demand for multifamily housing has led to strong conditions in 2021. However, the report also mentioned that 2022 still had uncertainties, more specifically increasing inflation and the more transmissible Omicron variant of COVID-19 potentially slowing down economic conditions. Even with the uncertainties, Freddie Mac still expects the U.S.’ multifamily market to see continued growth for the short term.

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