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Freddie Mac Predicts Strong 2016 for Multifamily Mortgages
Wednesday, February 17, 2016 6:45 AM

Steady economic growth and a number of other drivers will keep the multifamily market strong throughout 2016, according to Freddie Mac’s most recent Multifamily Outlook. This growth will largely be due to a new supply of multifamily units continuing to enter the market and an increase in plans for additional construction.

"We started 2016 with good momentum on the heels of a strong year," said Steve Guggenmos, Freddie Mac Multifamily’s vice president of research and modeling. "This year more multifamily supply will enter the market at a pace not seen since the 1980s. We expect the multifamily sector to continue to grow at a robust level, with the national vacancy rate staying below the historical average throughout 2016, and ending the year under 5 percent. As a result, rent growth will remain strong as new supply continues to be met with significant demand."

Other highlights of the report include:

  • Some individual markets are starting to moderate;
  • Favorable demographic trends, strength in the job market, and reduced affordability of owning a home will continue to fuel strong demand for multifamily rental units;
  • As more supply enters the markets, the national vacancy rate will increase slightly, but remain less than the historical average through 2016;
  • Annual industry originations will grow to $250 billion-$260 billion due to increasing property prices, new completions, and maturities, along with favorable investment opportunities; and
  • Cap rate spreads will tighten to 300-330 basis points.