Multifamily Originations Poised for a Solid 2020

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Freddie Mac is projecting that origination volume in the multifamily sector will continue its strong performance from 2019 into 2020, reaching $390 billion by the end of this year.

Moreover, rent growth will continue at levels just above the historic average, and new supply will continue to be absorbed as demographics and lifestyle preferences continue to fuel consumer demand for rentals, according to the GSE’s most recent outlook.

“We believe the most likely scenario for 2020 is one of continued growth in the multifamily market,” says Steve Guggenmos, Freddie Mac’s vice president for multifamily research and modeling.

“While there are several economic uncertainties that could impact the broader economy, the fundamentals backing multifamily remain solid,” he adds.

Freddie Mac’s Multifamily 2020 Outlook outlines several key findings:

  • The multifamily market is expected to finish 2019 with solid rent growth and only modest increases in vacancy rates despite an elevated level of new supply.
  • Multifamily construction will remain elevated through 2020 and into 2021 based on permits and starts that are already under way. Demand is expected to remain robust due to demographic and lifestyle preferences, but with the continued level of elevated supply, vacancy rates may increase just above the historical average. As a result, gross income growth may decline to just below the historical average but remain well above target inflation in 2020.
  • Lower interest rates, along with solid multifamily fundamentals and strong investor demand for multifamily properties, kept cap rates relatively flat throughout 2019, and cap rate spreads were historically at the start of 2020. As a result, multifamily origination volume is expected to come in at $369 billion in 2019, up 8.8% from 2018, and is projected to grow to $390 billion in 2020, an increase of 5.7%.

Find the Multifamily 2020 Outlook here.

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