Freddie Mac’s Steve Guggenmos, VP of Multifamily Research & Modeling, laid out what’s anticipated for the multifamily sector in 2023: that the shape of the economy in the next few months will directly impact factors such as rent growth, valuations, interest rates, cap rates, and supply for the apartment sector for the balance of the year.
What is seen by many as a necessary correction, Freddie Mac points out in its 2023 Multifamily Outlook Report that rent growth is moderating, vacancy rates are increasing, and deal volume is slowing due to rising interest rates.
Even still, there is optimism in the multifamily market, as rent growth for 2022 ended the year up 6.2% year over year (YOY) according to Yardi Matrix, and the vacancy rate – due in part to much-needed increased supply – is expected to rise modestly to 5.1%.
The report states, “We expect growth in multifamily fundamentals to decelerate through the first few months of 2023 but demand for housing, including multifamily, is expected to return later in the year, as long as the labor market doesn’t fall into recessionary territory.”
Regarding best-performing markets – Freddie Mac predicts predominantly small Southwestern and Florida markets will shine in 2023, driven by historically low vacancy rates, strong household income growth and relatively minimal new supply.
Overall, Freddie Mac predicts that 2023 multifamily origination volume may fall 4 to 5%, or around $440 billion.
To download Freddie Mac’s 2023 Multifamily Outlook report, click here.