Market conditions for multifamily owners and operators weakened over the past three months due to interest rate volatility and increases, according to the most recent survey of members of the National Multifamily Housing Council (NMHC) presented during the Q4 2026 State of the Multifamily Market October 22, 2026 webinar. However, demand and supply fundamentals are positive for rental housing, according to Martha Hastings, executive vice president for multihousing investment sales for CBRE. She anticipates that once volatility calms, sales transactions and rent growth will improve as supply continues to be absorbed.
The October survey results generated a Market Tightness Index of 47, well below the third quarter’s score of 57. Anything below 50 indicates looser market conditions, with lower rent growth and higher vacancy rates, according to Chris Bruen, senior director of research and chief economist for NHMC. While 53% of respondents indicated that their market conditions were unchanged, 21% said that conditions had improved over the previous three months. However, more than one-fourth of respondents (26%) said that their market conditions were worse, which was much higher than the 15% who reported worsening conditions in July, although much lower than the 43% who believed conditions were worse in NMHC’s January survey.
All other indexes in the survey declined from July to October, including sales volume, which dropped from 46 to 22, an indication of a decrease in deal flow. The debt financing index dropped to 10, down from 46 in July, with 81% of respondents reporting that it’s a worse time to borrow compared to three months ago. Respondents also registered a decrease in availability of equity financing, with the index dropping to 17 from 44 in July and 49 in April. Approximately two-thirds of respondents (66%) said there was less equity financing available than three months ago.
For this survey, NMHC asked an additional question about members’ options for refinancing. Among those owners with maturing loans (78% of respondents), 61% said debt serving coverage or loan-to-value ratios were preventing them from refinancing. Nearly half (45%) said they or their clients will inject additional equity into the deal to refinance, while 39% said their lender is offering modifications or extensions. In addition, 16% said they will turn to mezzanine debt or preferred equity, while 17% said they may face foreclosure on some properties.
Hastings and Chris Nebenzahl, Americas head of multifamily research for CBRE, said that the slowdown in the multifamily sector over the past three months is tied to elevated interest rates and volatility in rates, as well as increased inflation. The volatility makes investors and operators nervous, but Hastings expects improvement to a new normal as rate volatility calms.
Regional Performance Differences and Sluggish Sales
The growth engine in the Sunbelt has slowed in the last couple of years, and Nebenzahl anticipates some additional stress for another year or two. However, gateway markets such as San Francisco, Chicago, New York and Boston are performing best.
“There may be more opportunities for buyers in the Sunbelt,” he said. “But we’re seeing green shoots of rent growth in markets such as Austin and Denver, which are still negative but rebounding faster.”
Absorption rates are at the fifth highest rate since 2000, Hastings said, so she anticipates more consistent positive rent growth as more supply gets absorbed.
Higher interest rates will put a damper on the timing of some transactions, possibly pushing some out to 2027, Hastings said. However, she said there’s still a desire for multifamily transactions.
“The sales volume will return as rates settle down,” she said. “This will be a flash in the pan. People are looking for creative solutions now, and more people will re-engage as the rules of the game stabilize.”
Hastings said that fundamentals such as retention rates, positive net migration in many markets and improving rent growth will lift the multifamily sector and encourage more transactions. Higher interest rates and higher construction costs make purchasing existing buildings more attractive.
Affordability and Apartments
The cost to own a home rather than rent is drastically higher, so Nebenzahl anticipates continued strong renter demand, strong renewal rates and households staying renters for longer periods, all of which will help rent growth return for both new tenants and renewals.
However, renters in workforce housing are stretching more to pay their rent and experiencing more stress, which in turn has slowed rent growth more sharply at that price point, he said.
Supply Side Trends
Most housing markets are seeing a material slowdown in supply, including Austin, Denver, Phoenix, the Carolinas and Atlanta, according to Nebenzahl. In San Francisco, which is experiencing a sharp increase in demand, there’s some construction starts growth but it’s unlikely to have a significant impact on limited supply there, he said.
“High construction costs and high interest rates, along with soft rents, make it difficult to pencil new multifamily projects,” Nebenzahl said. “I think we’ll see limited new development for the next few years.”
Maturing Loans
Over the next two to three years, approximately $750 billion in multifamily loans are maturing, Hastings said. She believes it’s too early to determine the impact of those loans. Some borrowers may need to sell or refinance, but she expects lenders to work with owners if their buildings are performing well with low vacancy rates, steady rents and low operating costs.
However, she mentioned that if the cost of debt doubles, the same NOI can’t support the same level of debt. What happens in that case will vary from property to property, depending in part on whether significant capital is needed for improvements or if the building is underperforming.
Multifamily Fundamentals
Job growth has always been a leading indicator for housing demand and rent growth, Nebenzahl said.
“We’ve seen softer job growth in recent years, but it’s been decent in 2026, plus unemployment is very low,” he said. “We don’t have significant immigration to fill open jobs and there’s not natural population growth aging into the job market, so this will keep the absolute number of jobs created low. We just don’t have the labor pool to fill them.”
Nebenzahl anticipates that this will be a headwind in the future to fill apartments. However, he expects there to be a solid floor for apartment demand because of the high cost of homeownership.
“Multifamily investors need to focus on fundamentals,” Nebenzahl said. “There’s a relationship between rent growth and transactions, closer than the relationship between interest rates and transactions. We’re looking for positive rent growth coming out of the third quarter this year, especially in California and the Midwest, plus we see a recovery taking shape in the Sunbelt.”
The momentum in fundamentals has shifted, with supply coming down and, on the demand side, low unemployment, continued household formations and steady job growth of 50,000 to 60,000 jobs per month, he said.