Freddie Mac Multifamily is projecting a strong second half of the year for the apartment market. With demand for multifamily housing exceeding pre-pandemic levels, its midyear outlook predicts rising rents, falling vacancies, and record-setting originations for 2021.
Driving the projections are the continued strength across the secondary and tertiary markets of the Sun Belt and Midwest and the pickup in investment activity. Freddie Mac expects that overall multifamily origination volume will continue to see growth in the second half, reaching within the record-setting range of between $385 billion and $410 billion over the full year.
“We believe the multifamily market will continue to grow in the second half of 2021 as the country and the economy rebuild after the challenges brought on by the COVID-19 pandemic,” said Steve Guggenmos, Freddie Mac’s vice president for multifamily research and modeling. “Larger gateway markets continue to feel the impact of the pandemic, such as New York City and San Francisco, but the majority of markets will continue to see rent growth through the rest of 2021. Underlying demand drivers support strong multifamily market fundamentals and have set a foundation for continued growth as economic conditions improve.”
According to the outlook, the nation’s improved economic conditions and enhanced unemployment benefits have helped stabilize renters’ incomes, increasing demand for multifamily housing. Multifamily construction projections for the year are still mixed; however, they are expected to remain elevated even if they don’t exceed last year’s totals.
Positive rent growth is expected for the majority of metros, 90%, across the nation. Markets with the highest projected rent growth include Fort Worth, Texas, Las Vegas, Memphis, and Phoenix. Larger gateway markets, including Miami, New York, San Francisco, and Washington, D.C., are expected to continue to see negative growth. An overall 2.9% increase in gross income is predicted for 2021, anticipating a vacancy rate lowering to 5% and 2.5% rent growth.