Freddie Mac is expecting continued growth in the multifamily market throughout 2020. In its just-released Multifamily 2020 Outlook report, the government-sponsored enterprise predicted that final numbers from 2019 will show the multifamily market in the U.S. finishing 2019 with solid rent growth and only modest vacancy rate increases, despite an increased amount of supply.
However, while more growth is expected throughout the year, it will be modest in comparison to recent years. Rent growth, which hit 5.2 percent overall in 2018, came back down to earth a bit in 2019, at 4.1 percent for the 12 months ending third quarter 2019, according to REIS. While the number is lower than previous years, it remains above the historic average of 3.4 percent, according to the report.
On the absorption side, the multifamily rental market experienced healthy absorption rates in 2019, averaging about 285,000 units over the past year. As of the third quarter in 2019, multifamily completions in properties with five or more units slightly increased in 2019 compared with 2018, with a 2 percent rise, according to the U.S. Bureau. Numbers from the agency also showed that permit growth is up 3 percent and starts are up 2 percent. The figures point to supply remaining elevated for at least the next few years, according to Freddie Mac.
The report highlighted the strength of the sunbelt market, which has continued to perform well over the last several quarters. The Tampa, Fla.; Phoenix; Ft. Lauderdale, Fla.; and Las Vegas metro areas are expected to have strong multifamily performance in 2020, led by growth in employment, jobs, income, rent and starts.
More legislation and reform surrounding rent regulation laws across the country last year have added additional risks to the multifamily market, especially in terms of decreased supply. However, Freddie Mac does not expect any “looming headwinds” in 2020 that would cause any major issues for the multifamily market, with the exception of economic uncertainties surrounding ongoing trade issues with China, which has caused a slight decrease in GDP by about 0.4 percent, according to Moody’s Analytics, and a decline in consumer confidence and business investment.
“While there are several economic uncertainties that could impact the broader economy, we believe the most likely scenario for 2020 is one of economic stability and continued growth in the multifamily market,” the report read.