Freddie Mac expects more, albeit subdued, growth in multifamily in 2022

Coming off the apartment market’s astounding 2021, Freddie Mac Multifamily projects more growth for the sector in the year ahead, albeit at a more modest pace.

Full-year totals for 2021 aren’t yet available, but the government-sponsored enterprise expects originations in 2021 to come in at $450 billion, up 25% from the $360 billion seen in 2020. For 2022, Freddie anticipates that multifamily origination volume nationwide will grow to between $475 billion and $500 billion, a gain of roughly 6-11%.

“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 & Modeling at Freddie Mac. “We anticipate rent growth in all markets in 2022 due to strong demand driven by improving economic conditions.”

Multifamily demand in 2021 reached unprecedented peaks, driven by accelerating economic conditions as the worst of the COVID-19 crisis was left in the rearview. While slowed leasing activity meaningfully and sent renewal rates skyrocketing during the second and third quarters of 2020, that pent-up demand led to a significant rebound in the same quarters of the following year.

Apartment demand soared to the highest levels ever reported in Q2 and Q3 of 2021, Freddie Mac noted, citing RealPage’s demand metric expressed through national absorption. During the third quarter, in fact, annualized demand reached over 600,000 units – more than 50% above the pre-pandemic high of about 400,000 units during the tech boom over 20 years ago.

As demand grew, so have rents. RealPage data has both renewal and new lease rents up 6.1% annually in the third quarter of 2021 alone. And while full-year 2021 numbers are as yet unavailable, rent growth for the year is projected to reach near 10%, a figure that would surpass previous highs if reached.

Such demand also translated into big spending in multifamily sales, with Q3 2021 investment volume reaching an all-time quarterly high of almost $79 billion, according to Real Capital Analytics (RCA). That’s nearly triple the Q3 2020 level and 60% above the level seen in Q3 2019.

Moving forward, the unreal peaks of 2021 renter demand aren’t forecast to sustain, but nationwide absorption is set to stay strong. Realpage forecasts annualized demand of over 500,000 units in the first quarter of 2022. Such absorption numbers are projected to push rent growth in 2022, though like originations, gains are expected to be more subdued as those last year. For the full year, Freddie expects national rent growth of about 4% and positive annual rent growth in all 74 markets it covers, topping out at 8.2% in Phoenix, 7.7% in Tampa and 7.4% in Las Vegas. The origination forecast, though a step back from the growth rate of 2021, would still build off of the increase last year to set a new record volume.

It is worth noting that several downside risks do loom on the horizon. The COVID-19 virus remains a threat to the market, and new, more transmissible variants could result in further disruptions to improving economic conditions. Increasing inflation has also emerged as a growing concern; despite the high inflation seen in 2021, rent growth was more than sufficient to exceed the higher expenses brought about by the inflation rate. Looking forward into 2022 thus far, Freddie expects both inflation and rent growth to moderate, but rent growth is still projected to outpace inflation in most metros. And if expenses do rise significantly in 2022, Freddie noted that the impressive rent growth seen last year should help provide an adequate cushion.


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