In a slow recovery, ""Freddie Mac"":http://www.freddiemac.com expects to see further growth in the multifamily sector, while the homeownership rate is projected to tick down from its already historically low rate.[IMAGE]
According to the GSE's ""multifamily demand forecast"":http://www.freddiemac.com/multifamily/pdf/market_demand_forecast_2012-2015.pdf, the homeownership rate will descend by one or two percentage points to around the 65 percent level, which implies more than half of total new households, or 3.1 million families, will transition into rental units. On the other hand, the multifamily market is expected to reap somewhere around 1.7 million new renter households from 2011 to 2015. The projection is based on the assumption that the recovery is continuing at a slow pace.
Using a pessimistic scenario that assumes no recovery, the report says multifamily demand would still hit 1.6 million, and the homeownership rate will slip by 1.4 percent from the current 65.5 percent.
If the recovery were to push forward at an accelerated pace, about one million new multifamily renters are expected over the same period, while the homeownership rate is projected to rise to the 1999-2000 level in 2015 as 4 million new homeowners are added.[COLUMN_BREAK]
While both the single-family residential and multifamily markets were hurt during the most recent recession, the single-family market was more deeply impacted. The report noted single-family home prices dropped 28 percent from their peak.
The drop in prices also became a factor in the fall of the homeownership rate, which was 68.2 percent in 2007.
The multifamily segment, however, benefits from the shrinking rate of homeowners.
Freddie Mac says data from CBRE Econometric Advisors show commercial multifamily rent increased about 4.9 percent in 2011, while the vacancy rate dropped to the current level of 5 percent.
In addition, the supply of new multifamily units is low, with the Census Bureau showing 167,000 units began construction in 2011, Freddie Mac noted. The number is below the average volume of 260,000 units per year from 2001-2010.
Freddie Mac explained issues in the broader economy and credit conditions have slowed new supply from entering the multifamily segment.
Even though the number of new units in progress appears to be low, the report stated, ""market participants need to keep an eye on new supply, especially in their local markets.""
The GSE also noted growth for the single-family rental market, which has expanded 16 percent since 2007.
Freddie Mac expects an increase of 1.4 million single-family renters if the recovery continues at a slow pace and 800,000 new single-family renters if the recovery accelerates into 2015.
The analysis for the projections were based on several factors, such as unemployment, foreclosure, increased single-family supply, and home price growth.