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Despite continued headwinds, Freddie Mac is forecasting positive growth for 2024 as well as a favorable outlook for the long term for the multifamily industry.

Freddie Mac’s 2024 Multifamily Outlook shows an elevated multifamily supply pipeline, with peak completions expected for the coming year, will moderate potential rent gains. The baseline forecast for rent growth for the year is 2.5%, slightly below the annual average from 2000 to 2022. According to the government-sponsored enterprise, the impacts of high supply will vary nationwide, with the Sun Belt and Mountain West regions expected to see the highest levels of deliveries and the most pressure on rent growth. Freddie Mac also forecasts an expected gross income growth of 2.1% for 2024.

It also notes that vacancy rates are expected to be higher than average at 5.7%, which is 40 basis points above the 2000 to 2022 average.

Although interest rates are expected to remain elevated, Freddie Mac notes additional stability should result in stabilized cap rates and property values. By narrowing the buyer-seller gap on asset value, this could spur transaction volume in the multifamily market.

Freddie Mac also anticipates volume growth to return in the coming year—up to $370 billion to $380 billion, which is in line with 2019 volume but well below the highs of 2021 and 2022.

“The economy appears to be on track for a soft landing, although it may be bumpy throughout next year,” said Sara Hoffmann, director of multifamily research at Freddie Mac. “In 2024, the multifamily market may see additional strain from high levels of new supply and continued high interest rates but remains a favorable asset class given the state of the for-sale market and long-term demographic trends.”