Freddie Mac Predicts Record Multifamily Originations in 2021

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Lending for multifamily housing is projected to hit record levels in 2021, according to a new report released by Freddie Mac.

The Freddie Mac Multifamily Midyear Outlook projects that overall origination volume for the sector will continue to rise in the second half of 2021 to a record-setting range of between $385 billion to $410 billion for the full calendar year. The expected loan increase is fueled in large part by demand for housing across Sun Belt markets like Phoenix and Memphis, coupled with coastal markets experiencing a “slow recovery” from pandemic-driven struggles.

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“We believe that 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,” Steve Guggenmos, Freddie Mac’s vice president for multifamily research and modeling, said in a statement. “Underlying demand drivers will support strong multifamily market fundamentals and have set a foundation for continued growth as economic conditions improve.”

The Freddie Mac report noted that total multifamily origination volume for 2020 is still not known, with forecasting containing wide ranges due to a volatile year. The Mortgage Bankers Association has predicted $302 billion for 2020, which would equate to a 17 percent decline from 2019, but Freddie Mac said volume numbers could be as high as $365 billion.

The midyear outlook also showed that while large gateway markets like New York City, San Francisco, Washington, D.C. and Miami are still experiencing negative rental trends caused by the pandemic, nearly 90 percent of metro areas are expected to see positive rent growth in 2021. The vacancy rate is estimated to decrease to 5.0 percent, with rents predicted to rise 2.5 percent.

Demand for multifamily housing also now exceeds pre-pandemic levels nationally due to improved economic conditions and enhanced unemployment, according to the report. 

Andrew Coen can be reached at acoen@commercialobserver.com