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华尔街日报Multifamily Outlook: Stabilization and Balance Anticipated in 2026
Following the pandemic’s aftermath, the multifamily sector experienced significant shifts, including record-breaking rent growth, plunging vacancies, expanding construction starts, and an increase in household formation.
These days, things are different. Rents are declining. So are construction starts, while vacancies creep upward. All in all, a correctional shift is underway.
Industry experts told Connect CRE that, barring a black swan event, the industry is expected to continue this correctional shift in 2026.
“A return to balance is a statement we believe well captures the forthcoming sentiment for the multifamily real estate sector,” according to Excelsa Holding’s Managing Director and Head of Acquisitions, David Fletcher.
Examining the Past Year
The Overview
The highlights of 2025 featured a steady (though still high) interest rate environment, increased concessions and sluggish rent growth amid ongoing unit deliveries. And, according to Moody’s Senior Economist Lu Chen, the national vacancy rate remained at 6.5% for three consecutive quarters, indicating equilibrium.
“Demand is sufficient to absorb the excess supply entering many markets, but not enough to turn the overall occupancy trend around,” she commented.
However, performance varied by geography. Bonaventure Founder, CEO and CIO Dwight Dunton explained that markets keeping supply in check performed well. Those dealing with excess units are not so fortunate.
“Several of our markets are still working through near-term oversupply, particularly in markets in North Carolina and Texas,” said Karlin Conklin, president and COO, Investors Management Group (IMG). “Both lease-up and stabilized properties are using concessions and rent discounts to gain occupancy, which naturally creates downward pressure on effective rents.”
In the area of available liquidity, stable capital markets led to improved investor confidence, with lenders becoming more active during the second half of the year. This, in turn, meant that “development underwriting improved significantly,” said EMBREY’s Chief Investment Officer Garrett Karam. At the same time, “buyers are starting to underwrite better rent trends, which compresses spreads between 10-year (Treasuries) and cap rates,” he said.
Furthermore, “while the financing environment remains selective, it is materially healthier and more liquid than at the peak of monetary tightening,” Fletcher observed.
Meanwhile, operations took a hit. Brian Connolly, founder and CEO of Feasibility, explained that increased costs, combined with a softening labor market across core rental demographics, meant challenges in leasing new units. Chen also noted that average costs per unit continue to be above pre-pandemic levels, while “operating expenses continue to climb faster than both rental income and inflation.”
Affordability as an Investment Driver
Homeownership affordability (or lack thereof) means that renters remain in their apartments for longer, a trend that is expected to continue into the next year. Yet “there is still a significant shortage of true workforce and affordable housing, and the regulatory and cost barriers to adding that stock remain high in many jurisdictions,” commented Laura Khouri, president and COO of Western National Property Management.
This lack of moderately priced housing is encouraging investors to focus on affordable workforce and single-family rental housing, rather than core Class A product. Fletcher said that investors are gravitating toward “value-add opportunities and markets where rent-to-income ratios remain manageable.” At the same time, “development strategies increasingly emphasize efficient unit layouts, cost-conscious amenity packages, and suburban locations where land and construction costs support more attainable pricing,” he said.
Also of interest are creating and investing in communities that serve middle-income renters, which are “professionally managed, and priced for teachers, nurses, logistics workers, and public-sector employees who are the backbone of local economies,” Khouri added.
In other investment areas, Chen with Moody’s explained that the multifamily sector’s sensitivity to interest rates meant that “deals were challenging for buyers to pencil out because cap rate spreads are historically tight.” IMG’s Conklin agreed, adding that “acquisitions and refinances were difficult industry-wide because of debt costs, cap rates and valuations.”
Still, the transactions that did arrive at the closing table were led by motivated sellers as well as “compelling locations or business plans that can create value through operations rather than cap-rate compression,” Khouri said.
Connolly also explained that the current environment has offered buying opportunities, “particularly for well-capitalized investors, by pushing sellers to adjust pricing and by increasing the pool of distressed properties from over-leveraged, inexperienced operators.”
Future Risks
The experts explained that headwinds challenging the multifamily sector in 2026 aren’t too different from those in 2025. Specifics include:
Interest rates. Khouri said that even as interest rates are being cut, the sector continues to adjust to a higher-for-longer cost of capital, as well as refinancing stress. Karam agreed, noting that assets breaking ground or purchased in 2021-2022 will “come against debt maturities or covenants. I expect the majority to be extended or refinanced through private capital.”
Oversupply. Too much supply will continue to be an issue, especially in the Sun Belt and major metropolitan markets, resulting in high vacancy rates, continued concessions, and pressure on rent growth and NOI. “The risk is compounded by continued rising operating costs and the potential for slowing job growth among renters,” said Feasibility’s Connolly.
Operational costs. Chen explained that property owners and managers could cut back on property improvements, defer capital projects and focus only on essential repairs as costs increase. “This reactive approach risks long-term asset quality and tenant satisfaction, especially in markets where expense growth has been most pronounced,” she said.
Policy and regulations. Housing issues are receiving bipartisan support. However, “in too many conversations, landlords are portrayed as the problem rather than part of the solution,” commented Dunton with Bonaventure. Owners and landlords didn’t create the current situation. Still, “as an industry, we have to navigate a shifting policy environment in a way that encourages the creation and preservation of housing rather than unintentionally discouraging it,” he added.
But all isn’t gloom and doom. Said Fletcher: “The national outlook remains constructive, given the significant decline in the supply pipelines and the constancy of underlying renter demand.”
So, What’s in the Future?
The experts anticipate that “more of the same” will be the trend in 2026. “Soft, oversupplied markets will remain soft until they work through more inventory,” Dunton predicted. “Strong, supply-disciplined markets should continue to outperform.”
In addition, Connolly and Khouri predict that rent growth will continue to stabilize, partly due to reduced supply. “Many markets should see improving fundamentals, especially where job growth remains solid, and household formation recovers,” Khouri observed.
Chen indicated that changes in supply and demand will lead to rebalancing. “Slower construction delivery will help the market turn the corner. Although the job market is likely to cool further and population growth remains slow, supply growth would cool faster,” she said.
Investors will focus on areas with “durable demand and limited new competition,” Fletcher said. Class B and Class C properties might attract interest, as they offer “stable cash flows and resilient performance, making them central to value-add and income-oriented strategies heading into 2026,” he added.
However, Fletcher anticipated that transaction activity could remain below long-term averages, while “selective bank lending, and modest rent growth will limit the feasibility of many ground-up projects.” Conklin agreed, pointing out that new development activity could continue to decline as “the recent wave of new supply has made the market highly competitive and tightened underwriting expectations. Higher cap rates are depressing values for new build sales.”
On the liquidity side, TruAmerica Chief Investment Officer Noah Hochman said that capital and credit will favor proven sponsors. In contrast, “institutional capital is expected to remain cautious and highly selective in 2026,” he said. Specifically, sponsor quality will be the key differentiator.
Still, Karam with EMBREY is predicting that the summer of 2026 should support a “generally renewed sense of optimism to our industry and therefore increased transaction activity and more development activity.” Still, he cautioned, “developers just can’t start deals by flipping a switch, however, so I don’t expect new starts to appear overnight.”
Dunton summed up the forecasts by suggesting that 2026 might be “a fun year for those who are patient and prepared.” The combination of fewer deliveries, lower capital costs and assets reaching the end of their loan periods could create “ motivated sellers and attractive entry points for investors who are long-term focused and who are careful about where and what they buy,” he said.
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