Revenue and income growth at multifamily properties backed by Freddie Mac grew by 3.9 percent last year.

According to CoStar News, these 2,928 apartment properties — comprising nearly 765,000 units — continue to perform despite the volume of new multifamily deliveries, which has resulted in rising vacancies and higher expenses/debt service coverage.

“The strong revenue and NOI (net operating income) performance reflects the surprising continued demand for apartments,” according to CoStar Portfolio Strategy.

Average revenue per room in 2014 totaled $13,002, up from $12,520 in 2013. The average NOI per room in 2014 totaled $7,183, an increase of $6,911 compared to 2013.


During the same period, overall vacancy rose from 5.8 percent to 8.2 percent at Freddie Mac-securitized properties. Properties’ operating expenses were also up 4.1 percent year over year, while average debt service amount rose by 4.5 percent.

Of the 2,928 loans analyzed, all but five were paid up through June, with none of the reporting properties showing an operating loss.

CoStar expects the number of new renters will continue to increase faster than the rate at which current renters become homeowners. The firm points to a large group of younger individuals who favor renting over owning and are not financially ready for homeownership.

Younger renters continue to face a slow employment market, making them unlikely to buy. As of March 2015, the unemployment rate for households aged 20 to 24 was still above 10 percent.

Additionally, part-time employment for this group is high compared with historical averages, with part-time work accounting for more than 36 percent of their total employment.

In a separate analysis, Wells Fargo Securities found that revenue and NOI growth for multifamily properties included in conduit/CMBS loans was about 50 basis points higher than those in the Freddie Mac portfolio.

Email Erik Pisor.

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