Chapter 6
Multifamily
U.S. Real Estate Market Outlook 2026
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5 Minute Read
Trends to Watch
- Barriers to homeownership will continue to support multifamily demand:
Challenges for would-be homeowners in 2026 include a 105% monthly premium to buy vs. rent, an estimated shortage of 3.4 million single-family homes, high mortgage interest rates and elevated home prices. With more than half ($7 trillion) of the outstanding $13 trillion of mortgages financed at interest rates of less than 4%, fewer existing homeowners will be willing to sell, which in turn will drive multifamily lease renewals. - Demand will remain soft:
Softening renter demand due to tepid job growth is expected to continue in the first half of 2026. A slow-to-hire, slow-to-fire job market with low turnover is expected to reduce domestic migration and household formation and limit momentum in high-growth markets in the near term. - Operators will prioritize occupancy over rent growth, supported by strong renewals:
Effective asking rent growth is expected to remain low for much of 2026. Multifamily operators are strategically choosing to maintain occupancy rates rather than aggressively pursuing rent increases on newly signed leases. The near-term focus on offering significant concessions to new tenants is supported by historically strong renewal rates (57% of all leasing activity, up from 51% in 2015 and 48% in 2005) among existing residents, which is expected to increase further this year. - Sun Belt and Mountain markets face a twin dilemma:
Both macroeconomic headwinds and the lingering effects of a 50-year-high wave of new supply are weighing negatively on occupancies and forcing operators to compete on pricing for new tenants. As a result, the expected timeline to achieve positive asking rent growth has been pushed to late 2026 for many high-supply markets. - Investors could be put off by rent controls in certain markets:
Rent control initiatives have been key components of recent elections in markets such as Boston, Denver, New York and Seattle. If implemented, these initiatives will likely lead to lower investment activity and potentially constrain market-level liquidity in 2026 and beyond. Less new development as a result will limit opportunities for new renters.
Outlook
Labor market challenges, coupled with persistent inflation and relatively high interest rates, have weakened consumer sentiment and will weigh negatively on household formation and new multifamily leasing activity in the first half of 2026.
Despite multifamily vacancy rates largely stabilizing nationwide, year-over-year rent growth is expected to continue lagging pre-pandemic levels in 2026 due to economic headwinds and the large amount of new supply that remains available for lease, particularly in the Southeast, South Central and Mountain regions. Longer term, we expect these regions to outperform for job creation, inbound migration and multifamily performance, all of which will support future investment activity. The overall multifamily vacancy rate should continue to fall as more units are absorbed.
With near-term operational challenges in high-supply markets, cap rates are expected to remain stable in 2026 and show incremental compression in following years. Interest rate and inflation stability, competitive debt markets, lower economic uncertainty and recovering investment volumes will underpin this outlook for cap rates.
While the current overall vacancy rate of 4.4% is well below the 2010-to-2019 average of 5.2%, it is expected to rise over the next several quarters as renter demand does not fully offset the remaining supply pipeline. Operators are strategically focused on preserving occupancies by offering new tenants certain discounts. This will persist at least until the stronger seasonal leasing in Q2 and Q3 alleviates pressure on occupancy.
Figure 8: 2026 Forecast Rent Growth for 25 Largest Markets
With near-term operational challenges in high-supply markets, cap rates are expected to remain stable in 2026 and show incremental compression in following years.
Renters are renewing their existing leases at historically high levels (57% of all leasing activity). Not only do renewals reduce turnover costs and the risk of months of vacancy, but they dramatically outpace new leases for rent growth.
Because most widely reported rent growth figures are based on asking rents for new leases, they understate the actual performance of multifamily properties. Blended rent growth,1 which combines asking and renewal rents, is expected to remain higher than asking rent growth for new leases alone. The difference is especially pronounced in markets like Austin and Denver, where asking rent growth is projected to remain negative in 2026 yet blended growth will turn positive. More generally, the difference is largest in markets that depend the most on domestic migration and employment growth.
Blended rent growth will remain a key metric for underwriters, with renewals accounting for a larger share of all leasing activity.
Renters are renewing their existing leases at historically high levels. Not only do renewals reduce turnover costs and the risk of months of vacancy, but they dramatically outpace new leases for rent growth.
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Multifamily
Related Insights
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Buyer sentiment for core and value-add multifamily assets improved in Q3, while underwriting assumptions mostly held steady, according to CBRE’s Q3 Multifamily Underwriting Survey.
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Approximately 1.8 million U.S. renter households can no longer afford the median-priced home in their market due to less affordability of homeownership over the past five and a half years.
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