The multifamily industry is in the “very early stages of turning a corner,” says John Tagg, national research manager at Northmarq.
“Many markets are working through the tail end of peak supply, while others are still seeing deliveries come online,” he notes. “The recovery will be uneven, but, overall, the trajectory is moving in the right direction.”
Tagg, who oversees research report production for Northmarq’s commercial real estate brokerage and investment sales teams nationwide, shares his outlook on the state of multifamily, the impact of slowing deliveries, and the markets best positioned for recovery.
With deliveries dropping in 2026, how fast do fundamentals snap back?
It will vary by market, but it could take up to a year for fundamentals to meaningfully improve as this wave of supply is absorbed. Markets with strong population and job growth should recover more quickly, while those with weaker demand may take longer.
How meaningful is this pullback compared with past cycles?
The timing is notable. The recent supply wave was financed during a period of historically low construction costs of capital and exceptional rent growth, just before the Fed rapidly raised interest rates as deliveries peaked. Entering 2026, many expected multiple rate cuts, but persistent inflation has complicated that outlook. While the pullback in supply should support occupancy and rent growth, elevated borrowing costs continue to challenge refinancing, acquisitions, and new development.
Sun Belt markets took the brunt of oversupply—where do they stand today?
It really varies by market, but there are encouraging signs. Concessions in some markets have begun to moderate, pipelines are bottoming out, and occupancy is starting to improve. While conditions remain competitive in certain areas, the worst of the supply pressure appears to be behind us.
Why is the Midwest outperforming right now?
The Midwest largely avoided the overbuilding seen in other regions, which has helped fundamentals remain relatively stable. It has also benefited from its relative affordability, which attracted residents during the remote work boom and continues to appeal to both renters and employers today.
Which markets are best positioned to recover first—and why?
Markets best positioned to recover are those where new supply is slowing while demand drivers remain strong—particularly job growth, population growth, affordability, quality of life, and a favorable business climate.
What’s keeping renter demand resilient despite elevated supply?
Affordability remains the primary driver. Higher home prices and mortgage rates have raised barriers to homeownership, keeping many households in the rental pool. At the same time, some renters are intentionally delaying home purchases, valuing flexibility, and, in some cases, prioritizing investment returns in other asset classes.
What are the biggest risk and opportunities today for multifamily?
The biggest risk remains uncertainty around interest rates. On the opportunity side, there’s strong potential in growing suburban markets adjacent to major metropolitan areas, where demographics and relative affordability continue to support demand.
What’s the one indicator you’re watching most closely for the second half of the year?
I’m closely watching inflation, particularly in the context of current geopolitical dynamics. It’s a key factor shaping expectations for Fed policy and, in turn, capital markets.