Freddie Mac: U.S. 2017 Multifamily Origination Volume Could Top $295 Billion

Mike Sorohan msorohan@mba.org

April 12, 2017

Freddie Mac, McLean, Va., said total multifamily origination volumes could increase by 3-6 percent this year to $295 billion, depending on movements in the 10-Year Treasury rate.

According to a new Multifamily Pricing and Volume Outlook for 2017, should the 10-Year Treasury rate stays in the range of 2.5 percent, multifamily volume could grow to nearly $300 billion. While final numbers for 2016 volume are not yet in, this would equate to 6 percent growth from Freddie Mac’s 2016 estimated total mortgage origination volume of $280 billion.

However, Freddie Mac noted volume growth could slow to 3 percent if the average 10-Year Treasury rate rises more abruptly. Total origination volume would continue to grow even in the higher rates scenario, said Freddie Mac Multifamily Vice President of Research and Modeling Steve Guggenmos, because of the accompanying higher inflation and wage growth, as well as recent price appreciation.

“The multifamily market is poised for growth and record origination volumes in 2017 under either interest rate scenario,” Guggenmos said. “This fact underscores the underlying strength of the multifamily sector thanks to a strong labor market, demand from new households and steady absorption rates. Consequently, a moderate rise in interest rates alone will not be enough to cause any significant disruption to the multifamily investment market.”

Depending upon how high interest rates rise over the course of the year, Freddie Mac expects the nationally aggregated cap rate to range from 5.8 percent to 6 percent, which could contribute to a reduction in the rate of property price growth nationally from near 13 percent last year to a range of 2.9 percent to 4.5 percent in 2017. By contrast, the average annual growth rate seen in the post-recession years was 14 percent.

The Mortgage Bankers Association comes in with a more conservative forecast. Its Commercial/Multifamily Real Estate Finance Forecast (www.mba.org/crefresearch) projects commercial and multifamily mortgage originations to grow to $515 billion in 2017, an increase of 3 percent from $502 billion in 2016 estimated volumes. Mortgage banker originations of multifamily mortgages, specifically, are forecast at $219 billion in 2017, with total multifamily lending at $267 billion.

MBA projects commercial/multifamily mortgage debt outstanding to continue to grow in 2017, ending the year above $3 trillion, nearly 4 percent higher than at the end of 2016.

MBA also noted last week that commercial and multifamily mortgage bankers closed $490.6 billion of loans in 2016, down by 3 percent from 2015′s record volume but still the third-highest year on record. The report said for property types, multifamily properties saw the highest origination volume, $214.1 billion.

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