After three years of rate turbulence, historic construction volume, and cap‑rate resets, 2026 is shaping up to be a transitional year for U.S. multifamily — the beginning of a slow normalization in which rents, occupancy, lease‑ups, concessions and expenses finally bottom out and move toward stabilization. The recovery will be gradual and uneven, highly dependent on region and asset class, with best‑in‑class properties rising to the top.
Rent Growth: The Final Flat Year
Experts expect 2026 to be the last weak rent‑growth year before declining supply sets up stronger gains in 2027 to 2028.
- Yardi Matrix forecasts national rent growth of 1.2%, with coastal and Midwest markets outperforming and Sun Belt metros such as Austin, Phoenix, Raleigh, N.C., and Orlando remaining challenged.
- Deep concessions will persist in high‑supply markets until late 2026, RealPage reports.
- New leases will continue to post negative rent growth due to concessions, while renewal rents remain stronger, hovering near 50% in December 2025, which will hold steady into 2026, said John Chang, chief intelligence and analytics officer at Marcus & Millichap in a recent webinar the company hosted. Most renters now stay put unless they move for a new job or return home, added Rob Bollhoffer, chief investment officer and managing director at 29th Street Capital.
- CF Capital sees rents stabilizing but not accelerating, with investors focused on cash flow amid rising operating expenses — particularly taxes, insurance and payroll — that continue to compress NOI.
Supply Reaches a Turning Point
Roughly 500,000 new units were still in lease‑up at the end of 2025, creating intense competition and heavy concession use, according to Yardi Matrix. Combined with rising operating costs, owners faced meaningful NOI pressure.
But experts expect this to shift in 2026:
- Yardi Matrix projects 450,000 deliveries in 2026, down from 595,000 in 2025.
- New starts have fallen to their lowest level since 2012, setting up a potential undersupply as early as late 2026, reports RealPage.
- CF Capital characterizes 2026 as a year where supply remains heavy, but the trajectory visibly improves.
- Chang projects vacancy falling to about 4.7% by year‑end, with positive — but slower — absorption as deliveries taper.
Demand Rebounds Slowly
After soft demand in late 2025, expect modest improvement this year, supported by high homeownership costs and wage growth outpacing rents, but restrained by affordability challenges and uneven labor trends.
- Yardi Matrix expects demand to strengthen as the broader economy stabilizes.
- RealPage anticipates a more balanced supply‑and‑demand environment.
- Chang predicts unemployment to hold near 4.8% in 2026, but reach 7% for young adults, potentially softening demand for entry-level units. He also cited immigration policy and tariffs as pressures on household formation and operating costs. Kari Wilfong, principal COO at Apartment Ventures, added that immigration tightening has already dampened renewal rates in California.
- CF Capital emphasizes that demand was never the issue — delivery timing was. Markets with fewer 2026 deliveries are already seeing concessions recede and stabilization return.
Capital Markets: Liquidity Improves, Pricing Lags
Although 2026 is expected to bring more liquidity, lenders and deal activity, the market is still far from 2021‑level pricing or volume. Cap rates remain sticky; valuations have not rebounded and many vintage loans are still being resolved. Still, several bright spots stand out:
- Transaction volume rose 7.2% year-over-year in late 2025, with strong liquidity from GSEs, life companies and returning banks, according to Yardi Matrix.
- Trepp’s Jan. 13 Big Picture reports increased private‑credit activity as traditional lenders remain cautious, particularly in targeting maturing floating‑rate deals.
- Chang forecasts a 25% increase in lending activity in 2026 compared with 2025 as liquidity improves and lenders return to the market. He also expects cap rates to rise an additional 20% in 2026, suggesting pricing discovery is still ongoing. Wilfong added that while liquidity is returning, lenders remain selective, with tighter underwriting and more aggressive cap‑rate assumptions.
- CF Capital highlights the three 2025 rate cuts, which brought the Fed target range to 3.50%-3.75%, improving deal flow potential even under conservative underwriting.
Investor Strategy: Operators Take the Lead
Experts agree that 2026 favors disciplined operators over speculators.
- The strongest acquisitions of 2025 were driven by disciplined underwriting, operational improvements and patient capital — not speculative rent assumptions, reports CF Capital.
- Trepp reports sustained investor interest in Midwest value‑add assets, especially garden‑style communities, due to stable fundamentals and limited new supply.
Properties with operational inefficiencies — assets underperforming due to weak management rather than physical condition — offer attractive upside. Markets with limited new supply and strong wage‑earning renter bases, especially in the Midwest and Northeast, are expected to remain steady.
In the Marcus & Millichap webinar, Rishi Gupta, chief investment officer of Eagle Rock Advisors, stressed that reducing market volatility is as important as rate cuts. His team is focused on retention through customer service, improved amenities and cost‑efficient upgrades like cabinet refacing and light touchups instead of full remodels to preserve affordability while maintaining appeal.
Risk Factors to Watch
- Economic: Slowing job growth
- Policy: Tighter immigration reducing household formation and limiting labor availability; tariffs continuing to push up construction and material costs and inflation; uncertainty surrounding the incoming 2026 Fed chair.
- Operational: insurance, payroll, taxes and concessions in high‑supply markets
Conclusion
Multifamily fundamentals are expected to hit bottom in 2026, marking the beginning of a slow recovery. Demand will strengthen, supply will contract and capital will continue returning to the sector. Rent growth will remain muted, while pricing discovery plays out. The seeds of the next upcycle are planted this year, with momentum building in 2027 and real acceleration in 2028.
