Employment growth and preference for renting among millennials are expected to drive origination volume higher
Multifamily originations will set another record in 2018 as the moderated growth the market saw in 2017 will continue through to the new year, according to a new analysis by Freddie Mac.
"2018 will be another excellent year for the multifamily market,” said Steve Guggenmos, vice president of multifamily research and modeling at Freddie Mac. “While results across markets will vary, we expect this year to set another record in multifamily origination volume. Moreover, demographics and lifestyle preferences will continue to favor multifamily, by ensuring demand remains strong for the foreseeable future."
The positive outlook for the multifamily market reflects economic drivers combined with demographic factors. Freddie Mac expects demand for housing units to increase as employment growth continues to exceed population growth. Additionally, an increase in wages is expected to encourage the formation of even more households as the economy nears full employment.
Freddie Mac also said that the outlook reflects the preference for renting among millennials, baby boomers, and an increasingly diverse population, which it expects to continue fueling rental housing. Also, origination volume is expected to increase on higher property prices and increased market activity given forecasts of strong fundamentals and investor demand.
"In 2017, the multifamily market moderated, but remained strong despite high levels of new supply," Guggenmos said. "As we look to 2018, we expect last year's positive market performance to continue, with robust economic growth and solid fundamentals creating sustained demand among real estate investors."
Freddie Mac also expects the multifamily market to see rents continue to grow at current levels, completions peaking, and supply increasing only slightly faster than demand. Finally, vacancies in 2018 are predicted to stay below historical averages despite expectations that the national rate will remain on an upward trajectory.
Related stories:
Multifamily supply to meet demand
Multifamily confidence hits 6-year low
"2018 will be another excellent year for the multifamily market,” said Steve Guggenmos, vice president of multifamily research and modeling at Freddie Mac. “While results across markets will vary, we expect this year to set another record in multifamily origination volume. Moreover, demographics and lifestyle preferences will continue to favor multifamily, by ensuring demand remains strong for the foreseeable future."
The positive outlook for the multifamily market reflects economic drivers combined with demographic factors. Freddie Mac expects demand for housing units to increase as employment growth continues to exceed population growth. Additionally, an increase in wages is expected to encourage the formation of even more households as the economy nears full employment.
Freddie Mac also said that the outlook reflects the preference for renting among millennials, baby boomers, and an increasingly diverse population, which it expects to continue fueling rental housing. Also, origination volume is expected to increase on higher property prices and increased market activity given forecasts of strong fundamentals and investor demand.
"In 2017, the multifamily market moderated, but remained strong despite high levels of new supply," Guggenmos said. "As we look to 2018, we expect last year's positive market performance to continue, with robust economic growth and solid fundamentals creating sustained demand among real estate investors."
Freddie Mac also expects the multifamily market to see rents continue to grow at current levels, completions peaking, and supply increasing only slightly faster than demand. Finally, vacancies in 2018 are predicted to stay below historical averages despite expectations that the national rate will remain on an upward trajectory.
Related stories:
Multifamily supply to meet demand
Multifamily confidence hits 6-year low
