In an update to an earlier outlook published in January 2017, Freddie Mac Multifamily predicts in its new "Multifamily Volume and Pricing Outlook" for 2017 that total multifamily origination volume could increase by 3% to 6% this year, depending on the movements of the 10-year Treasury rate.
If the 10-year Treasury rate stays within the 2.5% range, multifamily origination volume is expected to grow to or even surpass $295 billion. This would equate to just under 6% growth from Freddie Mac’s estimated total origination volume of $280 billion in 2016. However, if the average 10-year Treasury rate rises more quickly, volume growth could slow to 3%, the GSE says, though higher inflation and wage growth would still spur total origination volume growth in this scenario.
"The multifamily market is poised for growth and record origination volumes in 2017 under either interest-rate scenario. This fact underscores the underlying strength of the multifamily sector thanks to a strong labor market, demand from new households, and steady absorption rates," Steve Guggenmos, Freddie Mac Multifamily vice president of research and modeling, said in a statement to the press. "Consequently, a moderate rise in interest rates alone will not be enough to cause any significant disruption to the multifamily investment market."
Freddie Mac expects the nationally aggregated cap rate to range from 5.8% to 6%, depending on how interest rates rise or fall. The rate of property price growth will consequently fall to a range of 2.9% to 4.5%, down from nearly 13% in 2016.
