Freddie Mac’s annual multifamily outlook projects another strong year, with rents continuing to increase despite an overall moderating market.
The report projects that the Sun Belt will outperform slow-growing smaller markets in the Northeast and Midwest.
“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.”
Growth broke records in 2021 thanks to changing migration patterns and strong economic conditions. Multifamily demand reached its highest ever levels during Q2 and Q3 of 2021, and rent growth is expected to have increased by 10% over the year.
The coming year is expected to be hot as well, though demand will moderate some due to inflation and the pandemic’s uncertain future.
Demand for existing properties is expected to remain high, and completions are expected to be elevated due to high levels of permits and starts.
Rents will continue growing, though at a slower pace than 2021. The Sun Belt in particular should see significant rent growth while the Northeast and Midwest are expected to have much slower rent growth. Vacancies are expected to remain flat at 4.8%.
Freddie also predicts that lending will grow to between $475 billion and 500 billion in 2022 as the apartment market gains strength.
But even a slowing market will be white-hot compared to pre-pandemic levels. Housing experts anticipate 2022 will see more inventory and therefore fewer bidding wars on a small supply of homes, resulting in slower-growing prices.
“All markets are seeing strong conditions, and home sales are the best they have been in 15 years,” Lawrence Yun, the chief economist at the National Association of Realtors, told the Washington Post. “The housing sector’s success will continue, but I don’t expect [2022’s] performance to exceed [2021’s].”
“With more housing inventory to hit the market, the intense multiple offers will start to ease. Home prices will continue to rise but at a slower pace.”
But as supply chain issues continue to pressure builders and buyers, demand should still outpace inventory.
“2022 will bring more balance to the housing market,” Redfin chief economist Daryl Fairweather told the Post.
“But don’t expect a buyer’s market; just more selection, less frenzy and slower price growth.”