Today’s edition sponsored by: JPI, Authentic, TeleCloud, Robora and ButterflyMX.
Did Multifamily Just Hit an Inflection Point?
You know the saying about how you’re “over the hill” when you reach age 40? It doesn’t mean you’re truly “old.” It just means that cold, hard stats tell us we’ve reached the inflection point.
I would use a kinda similar analogy to describe the current state of the U.S. apartment market today (though with a more positive connotation than aging!). It appears we’ve reached an inflection point in this apartment cycle. It doesn’t mean the market today is “strong” or even “balanced.” It means that after 3+ years of backpedaling, we’re now moving in the right direction again. We’re still in a hole, but now we’re starting to dig our way out.
(By the way, if you want a deeper dive on the state of the apartment market at the mid-point of 2026, check out this week’s episode of The Rent Roll podcast, featuring a friendly debate with Greystar head of research Quinn Eddins, on Apple, Spotify, YouTube or Amazon.)
I suspect we’ll eventually look back at the first half of 2026 as an inflection point of this cycle, or the start of a new cycle. Here’s why:
#1 Supply is plummeting in 2026
We’ve all expected the supply drop-off for a long time, and it’s really happening. Following the historic supply wave of 2023-25, completions in the first half of 2026 totaled about 150k units (similar to pre-COVID norms) and it’s trending further down. There are still plenty of 2024-25 completions still competing to lease up and stabilize, but in terms of new deliveries, they’re not evaporating entirely but they are trending toward mid-2010s levels.
#2 Apartment demand (absorption) was surprisingly strong in 1H’26
At the same time, apartment absorption has been surprisingly resilient. Despite all the headwinds (choppy job market, higher unemployment among recent college grads, re-accelerating inflation, low consumer confidence, etc.), we continue to see absorption levels way above normal. Both CoStar and RealPage reported 1H’26 net absorption topping 250k units, which is down a bit from last year’s peaks but still higher than any year prior to COVID.
Skeptics will try to explain away those numbers, but the data is what the data is: We have more than a quarter-million NET NEW apartment renting households compared to what we had going into 2026. That is a positive no matter how you slice it. And those new households tend to pay 21-22% of income toward rent, so these new renters are (generally) in good shape financially.
Of course, we should acknowledge those demand-side headwinds remain very real. They may very well pull down absorption going forward (and I would certainly expect absorption numbers to moderate, for this among other reasons). So no one is waving the “mission accomplished” flag here. We’re just saying the numbers to-date have been very good – and probably better than anyone expected.
#3 Vacancy is improving at the fastest pace since 2021
To be clear: Apartment vacancy rates remain elevated. There’s a big hole to dig out of following the largest supply wave since the 1970s. But we’re finally starting to see signs of real momentum.
Apartment List reported vacancy improvement in each of the past four months. That’s the first time that’s happened since 2021.
CoStar reported the largest Q2 vacancy decline since 2021.
And RealPage reported year-to-date vacancy declines topping any year since … you guessed it … 2021.
Of course, we should acknowledge these are AVERAGES. Not every portfolio, every asset, or every neighborhood will follow the same pattern. The way averages work is that there have to data points on both sides of the average, obviously.
Again, there’s still a ways to go. But reduced deliveries + resilient demand = improving occupancy. There’s little chance for renewed pricing power until vacancy rates rebound, so this is just one step in the process.
#4 Rents remain soft, but starting to show some momentum
Back in January, I wrote that apartment rents may have bottomed. So far, that hot take appears to be holding up.
Indeed, rents showed real momentum in Q2. Yes, year-over-year effective rent change is still negative in most higher-supplied markets and, yes, new lease rent trade-out is often negative, too.
But we’re talking about momentum here. Nationally, quarter-over-quarter rent change in Q2 came in at a four-year high, according to both CoStar and RealPage. On new lease trade-out (which is closer to a year-over-year metric), rents are less negative than previously. In fact, CoStar is showing effective quarter-over-quarter rent growth of 1.2%, which is closer to 2017-19 levels than to 2023-25 levels.
Here’s another little factoid: Even if there’s flat rent movement in the second half of 2026, we could end the year with around 2% rent growth. That’s because the second half of 2025 was the worst second half for rents in 15+ years. So as long as we don’t repeat that, we should see incremental improvement in the headline year-over-year rent metric.
#5 Even heavy-supplied markets are showing momentum
Again, we’re talking momentum here. In many higher-supplied markets, rents are still falling year-over-year, but at a moderating pace. In fact, here’s a trivia shocker for you: Guess which market saw the most momentum in YoY rent change between March and June?
It’s Austin, Texas!!! The market that is Exhibit A for what happens when we build a ton of apartments – rents fall. Well, deliveries are now tapering back fast. And while there are still plenty of 2024-25 completions working through prolonged lease-ups and keeping pressure on vacancy rates, there’s undoubtedly signs of momentum.
In this case, when I say “momentum,” I am looking at the second derivative in YoY rent change. What was rent change in June 2026, and how does that compare to March 2026? How much did that YoY number swing over the past three months?
No market saw a bigger upward swing than Austin. (In fairness, few markets had as much room to swing as Austin, either.) In March, rents were down 7.5% YoY in Austin. In June, rents were down 3.9% YoY. That’s a swing of 360 bps, and that’s the best in the country.
Right behind Austin is the already-hot trio of San Francisco Bay Area markets. Then the other markets rounding out the Top 10 are mostly higher-supplied markets of the Sun Belt and Mountains – Salt Lake City, Denver, Jacksonville, Riverside, Tampa and Raleigh. In most of those cases, as with Austin, rents are still down year-over-year, but to a lesser degree than previously.
So for all my friends in Austin and other high-supply markets: Don’t get too excited yet. There’s obviously still plenty of work to do. But we’re finally seeing some positive signs that momentum is shifting. You might even call it an inflection point.
— My Latest Posts on LinkedIn —
Here are some recent posts if you missed them:
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Apartment vacancy has declined in four straight months for the first time since 2021.
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Apartment absorption held surprisingly strong in 2026’s first half despite numerous headwinds.
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How much cheaper is it to rent a single-family house compared to buying one in different parts of the country?
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What’s the discount to rent an apartment versus buying a house in different parts of the country?
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There’s a case to be made for investing capital in a high-yield savings account over a New York City rent stabilized apartment.
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The ROAD to Housing Act has finally passed through Congress, and it’s not the investor ban some are saying it is.
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A planned ballot measure on rent control in Massachusetts has been shot down, but only because of a technicality.
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If your city makes rent payment essentially optional, don’t be surprised when collections drop off even for non-profit affordable housing.
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Wage growth topped rent growth for 41 straight months and counting, bringing rent-to-income ratios back to pre-pandemic levels.
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We have a deal: The Senate and House come to terms on the ROAD to Housing Act. Here’s what it means for SFR and BTR.
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If your city’s policies embrace housing developers yet demonize housing operators, you’re pushing a bait-and-switch strategy that development capital will see through … and you won’t build the housing you claim to support.
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Spring leasing numbers show signs of momentum.
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A new research paper from the Minneapolis Fed shows rent control has been a disaster for St. Paul, shifting a larger share of the tax burden onto homeowners.
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A newly published hit piece on LIHTC affordable housing reads like an unchecked airing of grievances, and misses the mark on an important topic.
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What are the common denominators for apartment projects still breaking ground? Here are the big six.
— Now Spinning on The Rent Roll Podcast —
For 2025, The Rent Roll with Jay Parsons podcast ranked in Spotify’s top 2% of podcasts for minutes played and in the top 1% for most shared shows. Additionally, The Rent Roll continues to frequently rank on Apple’s charts for investing-themed podcasts, and was recently ranked as the third-best podcast in all commercial real estate (and #1 in housing) by the readers of CRE Daily!
Thank you to everyone who’s made The Rent Roll part of your weekly routine! New episodes are released every Thursday morning.
Find us on YouTube, Spotify, Apple and Amazon. Recent episodes:
Episode 92: Mid-Year Multifamily Update with Greystar’s Quinn Eddins
Episode 91: When Will Rents Recover? “It Depends,” with Bridge’s Matt DeGraw
Episode 90: Inside the ROAD to Housing Act with U.S. Congressman Josh Harder
Episode 89: Inside UDR Apartment REIT with UDR’s Dave Bragg
Episode 88: The “Other” Berkshire with Berkshire’s Alan King
Episode 87: Preferred Equity, Debt & Anything But Common Equity with Marble Capital’s David Oelfke
Episode 86: In-House vs. Third-Party Management with Lantower Residential’s Emily Watson
