Written By: Joel Palmer, Op-Ed Writer
Industry experts expect another strong year for the multifamily market.
The latest multifamily forecast was released by the Mortgage Bankers Association (MBA). Its 2019 Commercial/Multifamily Real Estate Finance Forecast projects that steady commercial real estate markets and equity and debt availability will keep commercial and multifamily mortgage originations on par with volumes of the past two years.
MBA projects commercial and multifamily mortgage originations to total $530 billion in 2019. That’s slightly above 2018 volume of $526 billion and equal to the record $530 billion in 2017.
MBA is forecasting that multifamily lending will total $315 billion in 2019. Commercial/multifamily mortgage debt outstanding is expected to continue to grow in 2019, ending the year up 5 percent from 2018.
"Slowing global and domestic growth may have an impact on overall demand, but readily available equity and debt for commercial real estate should support transaction volumes,” said Jamie Woodwell, MBA's vice president for commercial real estate research. “Moderation in property value growth and sustained net operating income increases will likely extend the recent plateauing in transaction activity.”
MBA also projects that $110.5 billion of outstanding commercial and multifamily mortgages held by non-bank lenders and investors will mature in 2019. That would be an increase of 8 percent from the $102.2 billion that matured in 2018.
"The upcoming roll of commercial and multifamily mortgage maturities is relatively stable, after seven years of instability," said Woodwell.
According to MBA, the stability is due to a sizable share of shorter term loans financed in the last few years. The recession from a decade ago resulted in fewer 10-year loans. As a result, loan maturity volumes in 2018 and 2019 have been smaller than would otherwise be the case.
Both Fannie Mae and Freddie Mac have also forecasted strong multifamily demand for 2019.
The Freddie Mac Multifamily 2019 Outlook, released in January, said that rent growth and vacancies will outperform historical averages and that total originations will rise to another record year.
Freddie projects multifamily origination volume to grow from $305 billion in 2018 to $317 billion this year. It also said that rents and vacancies will continue outperforming historical averages through 2019. Rent growth is expected to reach 4 percent in 2019.
Freddie attributes the growth to demographic trends, a shift in consumer preferences toward urban areas and the high cost of home ownership.
Fannie Mae’s 2019 Multifamily Market Outlook, also released in January, quoted research showing an expected 453,000 multifamily units to be completed in 2019. That would be nearly 19 percent above the 381,000 completed in 2018.
Fannie cautioned that the peak in new multifamily units will coincide with an expected slowdown in job growth. According to the outlook, job growth will be 1 percent in 2019. Based on that job growth, the report said, multifamily rental demand could be in the range of 250,000 to 370,000 units, well below the 450,000 expected to be completed.
“Nevertheless, much of the new supply is primarily concentrated in about 10 to 12 metros, and most of that is further concentrated in certain submarkets,” according to Fannie’s report. “Additionally, the estimated amount of job growth, and its anticipated demand, differs widely metro by metro, meaning that some metros will be winners and some losers in terms of multifamily demand over the next 12 to 18 months."
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.