The industry seems to agree the multifamily housing market is recovering well and will continue to show positive signs this year. Both Fannie Mae and the National Association of Home Builders report low vacancies and climbing rents for 2012 and anticipate a strong market in 2013.
â€œLast year was a banner year for the multifamily market, and our baseline forecast calls for further steady growth in the rate of multifamily production,â€ said NAHB chief economist David Crowe at the associationâ€™s recent show.
Fannie Mae expects asking rent prices to increase about 2.5 percent this year and expects vacancy rates to increase to about 6 percent, keeping in line with historical norms.
The multifamily sector ended the year with a vacancy rate of about 5.5 percent, recorded in the fourth quarter, according to Fannie Mae. This rate â€œis at the low end of historical norms,â€ according to the GSE.
Average rent growth over the year in 2012 was about 3.25 percent, exceeding Fannie Maeâ€™s forecast of 3 percent for the year.
Analytics firms varied somewhat in their estimations of the national vacancy rate for 2012, with three firms falling between 4.5 percent and 5.62, according to Fannie Maeâ€™s research.
Axiometrics and CBRE Econometric Advisors both recorded increases in vacancy rates over the fourth quarter of 2012, while Reis, Inc., reported a decrease.
Fannie Mae suggested an increase in vacancy at the end of the year â€œis not unusual as there tends to be a seasonal upward movement in multifamily vacancy levels during the fourth quarter of each year â€“ a time when many tenants choose not to change residences.â€
The three firms all recorded growth in rental rates over the year. Axiometrics, which recorded the highest vacancy rate for the year, also reported the highest rent growth rate for the year at 3.85 percent.
CBRE calculated annual rent growth at 3.5 percent, and Reis, which reported the lowest vacancy rate, also reported the lowest rent growth rate at 3 percent for the year.
Looking forward, Fannie Mae expects the multifamily market to remain balanced, though the GSE reports â€œa potential for over-supply occurring during the next 24 months in a limited number of localized areas.â€
Both Fannie Mae and NAHB anticipate a rise in new construction for multifamily housing. However, some industry participants foresee some obstacles.
â€œA lack of capital is restraining the ability of developers in many markets across the country from being able to build apartment communities for residents of all income levels,â€ said Michael Costa, president and CEO of Highridge Costa Housing Partner LLC in Gardena, California, at the NAHB show.
Costa said rising construction costs, including increases in the costs of materials and labor, are hindering construction in some areas.