Another strong year is predicted for multifamily investment, according to Freddie Mac’s annual multifamily outlook. While 2021’s economic rebound resulted in a robust year for multifamily, Freddie Mac expects the growth to moderate this year due to concerns around inflation and COVID-19 variants. Demand for existing properties is anticipated to stay strong, and completions are expected to remain high with the recent increased levels of permits and starts.
Demand for multifamily housing in 2021 reached the highest levels RealPage has ever reported, according to Freddie Mac, and is expected to continue into the new year. Multifamily investment sales volume also set records last year, with an all-time quarterly high of almost $79 billion in property sales. Investment volume for the first three quarters of last year reached $179 billion, more than any other full year on record other than 2019, which totaled $193 billion.
Freddie Mac’s report also anticipates rent growth in all 74 markets it covers, with the Sun Belt markets outperforming the nation as smaller Midwest and Northeast markets grow at a slower rate. For example, markets with the highest projected rent growth this year include Phoenix at 8.2%; Tampa, Florida, at 7.7%; Las Vegas at 7.4%; and Tucson, Arizona, at 7.1%. The weakest rent growth, according to Freddie Mac, is expected in the suburbs of New York City and in Milwaukee; however, these metro areas are still expected to have growth between 2% and 2.5%. Nationwide, the government-sponsored enterprise is forecasting rent growth to be around 4% and vacancy rates to remain flat at 4.8% for the coming year.
In addition, multifamily origination volume is expected to grow this year between $475 billion and $500 billion, from the anticipated $450 billion in 2021.
“We believe the market will continue to grow in 2022, reflecting the strong multifamily fundamentals that drove the market to a record-breaking year in 2021,” said Steve Guggenmos, vice president of multifamily research and modeling at Freddie Mac. “We anticipate rent growth in all markets in 2022 due to strong demand by improving economic conditions.”