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Freddie Mac forecasts increasingly hot rental market

While it is no secret that vacancies are down and rents are up, Freddie Mac’s outlook is far from conservative.

Rental market activity data

According to Freddie Mac’s U.S. Economic and Housing Market Outlook for June, the residential rental market is on fire, and is expected to continue heating up as homeownership continues to be postponed by many Americans.

“Further increases in rental demand are likely in the coming year as newly formed households postpone homeownership decisions until the economy strengthens and they have accumulated sufficient savings,” said Frank Nothaft, vice president and chief economist of Freddie Mac. “Overall apartment market trends may show further vacancy declines and rent gains, with property values improving as well.”

Freddie reports that from March 2011 to March 2012, the rental market saw a 4.0 percent increase in occupancy, with an additional 1.5 million households moving into rental units.

Vacancies down, rents up

Rental vacancy rates have dropped roughly two percentage points over the past two years, the report notes, and while nominal rents rose two to four percent during the year ending March 2012, average rent on an inflation-adjusted basis remained below where it had been for much of the decade prior to the Great Recession. Some cities have seen rents spike up to 30 percent recently, and it is nearly unanimous that rents will continue rising across the board.

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The report says, “Multifamily property values are up on average about 25 percent during the past two years from their trough during the first quarter of 2010, according to the National Council of Real Estate Investment Fiduciaries index, but still about 14 percent below their peak prior to the Great Recession.”

Freddie notes that starts of buildings with at least five apartments have jumped 48 percent in the first five months of this year when compared to the same period a year ago. The National Association of Home Builders data released yesterday reveals volatility in the multifamily sector as completions fell 25 percent between April and May alone.

Regardless of inventory levels, starts, permits, or completions, Freddie is forecasting higher rents and lower vacancies as more families postpone homeownership.

Full report:
[ba-pdfviewer pdfurl=”” width=”100%” height=”800px”]

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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