August 2, 2016

Freddie Mac provided its mid-year outlook today, and sees a moderating but bright multifamily market ahead.


Following its second-quarter earnings report, the government-sponsored enterprise says it has processed about $27 billion in mortgage purchases so far this year.


“And that puts us on pace to be around between $50 billion to $55 billion,” for the year, said David Brickman on a conference call. “So far, it’s been a very robust year, another record half for us. We do see some moderation in the market but continue to have an overall positive outlook.”


Steve Guggenmos, vice president of multifamily research and modeling, believes that cap rates are in a very healthy place as the industry heads toward what should be a busy transaction season going forward.


The risk premium—that spread between cap rates and the yield on the 10-year Treasury note—is as healthy as it’s been. He noted that while average cap rates decreased to 5.7% in the first quarter, they’re unlikely to be affected by any fluctuations in the 10-year Treasury.


Top 10 Markets of 2017

Freddie Mac believes that rent growth will decelerate but stay high, and vacancies will tick-up but stay low, compared to historical averages through at least 2017. The culprit: supply outpacing demand in some markets. And the firm believes multifamily starts will remain high by historical standards for the rest of the year.


Here’s the top 10 for 2017:


Metro Rent Growth 2017

San Francisco 6.2%

Oakland 6.1%

Los Angeles 5.8%

Sacramento 5.5%

Tacoma, Wash. 5.1%

West Palm Beach, Fla. 5.0%

Chicago 5.0%

Portland, Ore. 4.9%

Seattle, Wash. 4.9%

San Diego 4.9%


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