Freddie Mac’s 2024 Midyear Outlook: Multifamily Market to Face Challenges Amid High Supply
MCLEAN, Va., July 23, 2024 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC) has released its 2024 Midyear Outlook, projecting a subdued performance for the multifamily sector throughout the rest of the year. The market is grappling with an unprecedented influx of new units, resulting in strong demand but below-average rent growth and a slight increase in vacancy rates.
The outlook highlights the overall strong economy driving multifamily demand. However, the supply-demand imbalance is slowing rent growth. Many metro areas, including the national market, have seen a decline in rent growth compared to the previous year. Notably, the biggest rent drops are occurring in pandemic boom markets where rapid rent increases in 2021-2022 led to a surge in supply.
Sara Hoffmann, senior director of Multifamily Research at Freddie Mac, stated, “Despite the near 40-year high in new supply, this challenge will be temporary and is mostly in high-demand areas. This will keep multifamily performance muted this year, but long-term prospects are positive due to an overall housing shortage, high for-sale housing prices, and favorable demographic trends.”
For 2024, Freddie Mac anticipates a rent growth of 2.7% and an increase in vacancy rates to 6%, translating to a 2.5% growth in gross rental income. The outlook favors secondary and tertiary markets, particularly in the southern plains and Sun Belt regions, which offer lower-cost alternatives to nearby larger markets. Conversely, markets facing significant new supply or weaker demand are expected to underperform.
The report also notes that elevated interest rates and steadily rising cap rates are putting downward pressure on property prices, resulting in a cap rate spread significantly below the long-term average. Freddie Mac Multifamily forecasts that if market conditions stabilize in the latter half of the year, multifamily transaction volumes could see a modest rebound from 2023, reaching approximately $320 billion.
For more information, read the original press release from: https://freddiemac.gcs-web.com/news-releases/news-release-details/freddie-mac-multifamilys-2024-midyear-outlook-forecasts-low-rent