It’s a Matter of When, Not if Multifamily Booms Again
The central question shaping the multifamily outlook is not whether the sector will recover, but when short-term uncertainty will give way to long-term strength.
“The big question is timing,” John Chang, chief intelligence and analytics officer at Marcus & Millichap, said in a research video.
Despite three years of record development — more than 1.4 million new units delivered nationally — multifamily fundamentals have proved resilient. Vacancy has already tightened 130 basis points from its 2024 peak, landing at 4.6% in Q3 2025. But the pace of absorption is cooling, shaped by rapidly shifting economic undercurrents.
The April rollout of Liberation Day tariffs heightened business uncertainty just as job creation began to falter, Chang noted. The U.S. economy generated nearly 500,000 jobs in the first four months of 2025, but only 193,000 between May and September. Conditions are especially challenging for the 20-28-year-old renter cohort, whose unemployment rate has jumped to 7.4%. Pair that with historically weak consumer sentiment and household formation slowing noticeably and you have pressure on near-term demand.
These headwinds are felt most acutely in the Sun Belt, where supply pipelines remain elevated while post-pandemic migration has normalized. Vacancies there now sit nearly 200 basis points higher than in lower-construction metros, and effective rent growth has been negative for three consecutive years. Markets with minimal new development, by contrast, appear better positioned to weather the turbulence in 2026.
Still, Chang stresses that the broader trajectory remains favorable. Construction activity has already contracted sharply, down 53% from their 2023 peak — and homeownership remains out of reach for many Americans, with mortgage payments averaging $1,200 more than apartment rents. Lease renewals are holding at an elevated 55%, making it tougher for apartment seekers to find new places.
More importantly, today’s slowdown appears to reflect deferred rather than diminished demand.
“Multifamily housing demand could rapidly outpace new construction, driving vacancy rates lower and boosting rent growth,” said Chang.
Once hiring improves and sentiment rebounds, absorption could accelerate quickly, especially given the limited supply risk through the rest of the decade, he added.
For investors, the next year is about positioning ahead of that eventual pivot.
Source: GlobeSt/ALM