Freddie Mac Sees Positive Growth in 2024 for Multi-Family

MCLEAN, Va.—The year ahead in the multifamily industry will see positive growth despite continued headwinds and a positive long-term forecast, Freddie Mac said in its 2024 Multifamily Outlook released Wednesday.

The Outlook indicates an elevated multifamily supply pipeline, with peak completions predicted in 2024, will moderate potential rent gains, which are expected to be positive in the year ahead, although below longer-run averages.

The Outlook also forecasts 2024 vacancy rates will be modestly higher than average but notes that a more stable interest rate environment could help spur transaction volume in 2024, with demand for rentals driven by prevailing demographic trends and expensive for-sale housing.

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

The Freddie Mac Multifamily 2024 Outlook projects an expected gross income growth of 2.1% for the year. Specific forecasts include:

• Multifamily demand is expected to remain positive but weaker compared with pre-pandemic rates.

• The 2024 baseline forecast is for rent growth of 2.5% for the year, slightly below the annual average from 2000 to 2022. The impacts of high supply vary across the country, with the Sun Belt and Mountain West regions expected to see the highest levels of new supply and the most pressure on rent growth.

• Vacancy rates will remain relatively stable in 2024 despite a predicted peak year for deliveries. The 2024 forecasted vacancy rate is 5.7%, 40 basis points higher than the 2000 to 2022 average.

• Although interest rates are expected to remain elevated in 2024, additional stability should result in stabilized cap rates and property values. By allowing buyers and sellers to agree on asset value, this trend could help drive transaction volume in the multifamily market.
• The Outlook predicts volume growth will return in 2024, up to $370 billion-$380 billion, which is in line with 2019 volume but well below the post-pandemic years of 2021 and 2022.

The report also showed the markets with the greatest rent declines in 2023 were those that saw some of the highest growth rates during the pandemic boom. They have also seen some of the greatest supply growth rates.  

Markets with significant rent declines include Orlando, Jacksonville, Atlanta, Phoenix and Las Vegas, each of which have seen rent fall anywhere from 3.5% to 4.7% year over year. Despite these recent declines, these markets experienced a total of 17% to 30% rent growth since October 2019.

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