By Paul Bergeron
Multifamily fundamentals’ current trajectory indicates that it is on track for a healthy 2023, according to Freddie Mac, although it may be a stronger second half compared with the first half, according to its 2023 Multifamily Outlook report.
Rents are projected to remain positive but continue to moderate, with the early few months of the US economy overall carrying a great deal of weight.
“Vacancy rates will increase from a combination of slower demand due to economic uncertainty and the high volume of new supply entering the market,” according to Freddie Mac. “Similarly, the volume will be muted until interest rate volatility can be curbed allowing for price discovery.
“The timing of this will determine how strong the multifamily market will grow in 2023. Even so, the tailwinds remain that will help prop up the multifamily market in the long run.
About that Recession
Demand is expected to increase later in the year unless the US falls into a recession. Freddie Mac estimates 3.9% rent growth for 2023.
“These forecasts rely on positive employment and household income growth, along with lower inflation,” according to the report.
“However, home prices are expected to decline in 2023, and data providers indicate higher levels of new multifamily supply will enter the market at a time when demand may slow. We think that one of the biggest risks to the multifamily market’s performance in 2023 is the state of the labor market throughout next year.”
Florida Home to Hot Markets; Phoenix and Vegas, Not So Much
Combining projected rent and vacancy rate expectations by metro, Freddie Mac named top and bottom performers for 2023.
Florida markets make up half of the top 10 markets, according to Freddie Mac, along with smaller Southwest markets in Oklahoma, Houston, and Riverside.
Phoenix and Las Vegas have fallen out of the top 10 from last year and many Florida markets remain in the top 10, but with lower growth in 2023 than expected in 2022.
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