State of the U.S. Multifamily Market: Mid-Year 2026

Effects of Supply Wave Linger, with Slow Recovery on Horizon

Midway through 2026, the multifamily market continues to struggle with weak rent growth and elevated vacancy, even as the pandemic-era supply wave continues to fade. However, several key indicators suggest conditions may be nearing a turning point, according to a recent Apartments.com webinar. CoStar’s Grant Montgomery, national director of multifamily analytics, shared an update on multifamily market performance for the year so far and offered the latest outlook for the quarters ahead.

Supply continues to decline, but vacancy remains high

Following a historic peak in 2024, when 696,000 new multifamily units were delivered, the construction pipeline has been slowing down. New deliveries fell to 531,000 in 2025, and this year the market is on track to deliver an estimated 421,000 additional units.

Even as the number of new deliveries declines, however, vacancy remains high. The national vacancy rate remains above 8 percent and is expected to stay in the mid-8 percent range through the end of the year.

A mismatch in supply and demand has kept vacancy elevated despite the drop in new supply.

Demand, which spiked in 2021, setting off this historic development cycle, has been insufficient to absorb the large influx of new units added in recent years. Absorption reached 697,000 units in 2021. The slowdown since then — 456,000 units absorbed in 2025 and an estimated 375,000 units on track to be absorbed this year — reflects a return to pre-pandemic norms.

As a result, many new construction properties have struggled to hit occupancy goals.

To attract renters under these challenging market conditions, multifamily operators have turned to concessions. Currently about 40 percent of advertised units feature a discount, compared to less than 30 percent pre-pandemic and under 10 percent in mid-2022.

Annual rent growth has remained weak nationally, even declining in high-supply markets. Rent growth has decelerated from above 1 percent in 2024. In the second quarter of this year, rent growth stood at 0.7 percent, where, after a slight uptick to 0.8 percent projected for the third quarter, it is expected to close the year.

“The market has stabilized, but it has not yet improved,” Montgomery said.

Rent growth accelerates in low-supply markets, remains negative in oversupplied areas

Despite the challenging conditions nationally, certain multifamily markets with strong demand and limited development have seen a strong performance this year.

For example, San Francisco, where AI development in the booming tech sector has driven up demand, asking rents have skyrocketed to nearly double digits. The San Francisco multifamily market, which extends beyond the city’s borders, has seen rents rise by 9 percent. San Francisco has topped the rent growth charts throughout the year. Neighboring San Jose, which has benefited from similar conditions, ranked second with 5.7 percent rent growth.

Many supply-heavy Sun Belt and Mountain markets, on the other hand, remain in negative territory, with rents declining year over year. In San Antonio, where the combination of excess supply and weakening demand has pushed multifamily vacancy higher than in any other major market, rents fell by 4.5 percent. In Austin, which has struggled for years to absorb a historic addition of new supply, rents declined by 3.3 percent.

Regionally, the Midwest, Northeast, and Pacific regions have been outperforming the national average for rent growth, while the South and Mountain regions have been underperforming.

Lower-priced properties post strongest performance, while luxury apartments return to positive growth

Rent growth also differs by price point, although the gaps among price points have begun to narrow.

The lowest price properties, which are known as one- and two-star properties in the CoStar building rating system, outperformed the national average, posting rent growth of 1.1 percent. Mid-priced, or three-star, properties posted 0.7 percent rent growth. The luxury class, known as four- and five-star properties, has recovered from negative territory and nearly caught up with mid-priced properties. Annual rent growth for this property class was 0.6 percent.