Freddie Mac economists are predicting another strong year for the multifamily industry.
The company's 2015 outlook, released Friday, forecasts strong household formation rates this year. Steve Guggenmos, senior director of multifamily investments & research at Freddie Mac, says that the positive employment picture will help give the industry another boost of demand.
“About 3.1 million non-farm jobs were added to the economy in 2014, the largest annual gain in 15 years,” he says. “And the unemployment rate was 5.6% at the end of the year, close to the Federal Reserve’s definition of full employment. This low unemployment combined with low wage growth should lead to more household formations and increase housing demand this year.”
The report indicates the new supply pipeline, and absorption rates, will continue to be robust. However, the report predicts that vacancy rates will revert back to historical norms in many metro areas including Baltimore, Los Angeles and Washington, D.C.
Freddie Mac officials are also predicting a strong outlook on the capital markets front. Guggenmos says Treasury rates aren’t expected to spike in the near term.
“If they end the year under 3%, then we expect multifamily capitalization rates to stay under 6% this year,” he says. “With low interest rates and high property prices, loan origination volume is expected to remain strong.”
Here’s the rest of what Guggenmos had to say about 2015: