CORRECTION: Just as the national homeownership rate showed signs of stabilizing over the past six months (See Has the Homeownership Rate Bottomed Out?), Freddie Mac’s Multifamily Research Group predicted today that the rate would fall another one to two points by 2015 despite the fact that the company, along with Fannie Mae, owns the mortgages for about half the single family homes in the nation.
Freddie’s forecast calls for an additional 1.7 million new multifamily renter households between now and 2015 as the result of recent declines in homeownership related to economic stress and high foreclosures in the single-family market.
Rental demand will continue to grow faster than historical averages. The single-family rental market, a growing and distinct market from multifamily, has expanded 16 percent (about 3 million units) since 2007. Multifamily demand is likely to be 1.7 million new renter households between now and 2015 (slow growth prediction).
“Currently, most industry practitioners, including us, expect overall economic growth to be slower than the long-run average. Given this outlook, we forecast that the homeownership rate will continue to decline to around the 65 percent level, which implies 3.1 million new families or more than half of total new households will move into rental units. Consequently, multifamily demand will be solid with a total of 1.7 million net new renters from 2011 to 2015. Considering that the current multifamily construction pipeline is around 200,000 this year, this scenario suggests continued strength in the multifamily market,” the forecast said.
If the economic recovery accelerates, demand will be in the one million new renter range; and if no recovery, then in the 1.6 million range for new renters, Fannie predicted. In the more optimistic scenario, there a rebound in homeownership and it will rise to the 1999-2000 level by 2012.
“The research supports the optimism that currently pervades the multifamily market. It confirms that multifamily is a bright spot in in the real estate market and the economy more broadly, and it will likely continue to shine for quite some time,” said David Brickman, senior vice president of Freddie Mac Multifamily.
“The economic data indicates that current rental markets are very strong with low vacancy rates, rising rents and solid demographic trends. What this research demonstrates is that these conditions are likely to remain in place for several years to come,” said Brinkman.
CORRECTION: EARLIER VERSIONS OF THE ARTICLE ATTRIBUTED THE FORECAST TO FANNIE MAE.