U.S. multifamily growth is likely to remain modest for the remainder of the year, according to a new market analysis from Yardi Matrix. While demand is positive, it’s not strong enough to make more than a dent in the nearly 1.3 million units in lease-up around the nation.
“Nationally, multifamily advertised rents increased modestly in the first half of the year, but if the post-pandemic pattern is a guide, full-year growth is likely to be limited,” noted the analysis. “Demand is positive, but with a ceiling from slowing population growth and cautious consumer sentiment. The direction of rents continues to be market-specific, with gains concentrated in undersupplied gateway markets and low-cost Midwest markets, while high-supply markets are still struggling to fill recent deliveries despite relatively strong demand.”
The analysis also pointed to uncertainty in the economy impacting demand, with weakening consumer spending, slowing population growth, muted job growth, and the pressures from the Middle East conflict as factors.
Rent growth remains regional. The supply wave from the last cycle placed significant downward pressure on rents, particularly in the Sun Belt and Mountain West. Rents have decreased the most since the start of 2023 in Austin, Texas, -14.7%; Phoenix, -9.2%; Atlanta and Orlando, Florida, both -5.4%; Raleigh-Durham, North Carolina, -5%; and Denver, -4.5%.
The strongest cumulative rent growth since the start of 2023 has been in New York, 18.4%; Chicago, 13.3%; Kansas City, Missouri, 11.8%; Columbus, Ohio, 10%; and Philadelphia, 8.6%.
This regional divergence is anticipated through the remainder of 2026. Yardi Matrix projected the strongest annual rent growth by year-end will be seen in Minnesota’s Twin Cities, 4.7%; Chicago, 4.1%; Kansas City, 3.9%; and New York, 3.1%. At the bottom of the list with the weakest projected performance are Phoenix, -6.2%; Denver, -5.9%; and Austin, -5.2%.
According to Yardi Matrix, multifamily starts decreased by more than a third last year, with the decline providing hope that the glut caused by rapid deliveries in the post-pandemic boom will soon turn around and give owners some pricing power. Approximately 450,000 rental units, including affordable and student housing as well as single-family build-to-rent, are expected to deliver in each of the next two years.
New supply this year will be concentrated in the Sun Belt and Northeast, with the largest delivery volumes anticipated in Dallas, 25,024 units; New York, 22,870 units; Phoenix, 19,465 units; Atlanta, 16,129 units; and New Jersey, 15,653 units.
Early data suggests a sharper slowdown in starts this year, attributed to rising material and construction costs, a shortage of labor in some markets, and weak rent growth scaring off prospective deals. About 80,000 multifamily starts were recorded in the first quarter, down 27% year over year and the lowest quarterly total since 2017.
Transaction volume is flat year over year and is not likely to pick up in the second half without a drop in mortgage rates. Yardi Matrix recorded $26.6 billion in multifamily transactions through the end of May, down 10.7% from the $29.8 billion completed during the same time period last year.
According to Yardi Matrix, deal flow remains boosted by both favorable capital flows for both debt and equity, but volatility in loan pricing has put a damper on transactions.
“The biggest factor in the lack of sales continues to be a dearth of sellers, since none of the impediments to deal flow have stopped investors from raising capital for multifamily assets,” the analysis stated. “But there isn’t enough to buy. Many potential sellers are still waiting for mortgage rates to drop further and allow buyers to bid lower acquisition yields and higher prices.”