Market conditions for multifamily owners and operators improved for the first time after three consecutive quarters of worsening conditions, according to the most recent survey of members of the National Multifamily Housing Council (NMHC) presented during the Q3 2026 State of the Multifamily Market July 23, 2026 webinar.
The Market Tightness Index was 57, an improvement over the second quarter’s score of 49. Anything above 50 indicates tighter market conditions, with higher rent growth and lower vacancy rates, according to Chris Bruen, senior director of research and chief economist for NHMC. While 55% of respondents indicated that their market conditions were unchanged, 29% said that conditions had improved over the previous three months. Only 15% said that their market conditions were worse – a significant drop from the 24% who said conditions were worse in April and 43% who believed conditions were worse in NMHC’s January survey.
However, other indexes in the survey declined from April to July. Sales volume dipped to an index of 46 from 52 in April, indicating a decrease in deal flow. The debt financing index dropped to 46, down from 51 in April and 75 in January, indicating that it’s a worse time to borrow compared to previous quarters. Respondents also registered a decrease in availability of equity financing, with the index dropping to 44 from 49 in April. Surveys from the first quarter of 2026 and the fourth quarter of 2025 had indexes above 50.
Vacancy rates and rent growth improved during the second quarter because of a combination of a burst of job growth and fewer multifamily completions, according to John Chang, a senior vice president and chief intelligence and analytics officer for Marcus & Millichap Real Estate Investment Services. However, he believes uncertainty around job growth makes forecasting for the multifamily sector more difficult.
“Historically, though, times of uncertainty can be the best time to make decisions, such as during the financial crisis and the pandemic,” Chang said. “There are opportunities for multifamily investors.”
Chang firmly believes a stronger multifamily market is ahead but whether the timeline is two, three or five years is challenging to predict.
“It’s important for investors to position themselves ahead of that strengthening and keep their eyes on the horizon,” he said. “We’re in a challenging cycle right now with trade, immigration and geopolitical policies, but multifamily will be a top investment and the next generation will need apartments.”
Market Variations
Chang pointed out that RealPage data shows strong absorption rates that support the survey results of generally improving conditions. However, he noted that some markets such as the San Francisco area are performing well above expectations, while other markets that were overdeveloped are seeing negative rent growth and flat vacancy rates.
“I was surprised that the second quarter showed as strong performance as it did, with some of the highest development markets showing strong absorption,” Chang said. “In some cases, that’s due to concessions, including as much as two or three months of free rent.”
Numerous Sunbelt markets such as Austin, Dallas and Phoenix have excess inventory because they “got over their skis a bit,” according to Chang. In addition to a big supply coming online all at once, these markets and others faced a national job market slowdown that also slowed household formation. Population migration has slowed compared to two years ago, he pointed out.
“The big question is when will these markets get back to positive rent growth,” Chang said. “Some markets will improve sooner than others. It just depends on the economy and job creation.”
Chang anticipates improvement within a year or two in most of these oversupplied markets depending on the job market. In Phoenix, for example, job growth is strong, but he anticipates a supply overhang for at least two years or longer since some multifamily buildings in the pipeline have yet to start construction.
Macroeconomics and Multifamily Demand
Tracking job data to forecast multifamily demand has become increasingly challenging, Chang said. Normally, job report revisions had about a 15% variation, but since the pandemic, revisions are often as high as 35%, he pointed out
“That leaves people skeptical about which data is correct,” he said.
Another challenging issue for the job market and forecasting is tariffs, which Chang said had stabilized somewhat until the Supreme Court decision cancelled them. Now, he said, another round of chaos around tariffs is about to begin.
Chang said hiring picked up during the period of stability around tariffs, but now with new tariffs and the ongoing war in the Middle East that’s causing higher oil prices, he anticipates a new pullback in hiring.
In addition to job growth, a core variable in multifamily demand is interest rates. With a higher for longer interest rate climate, renters are more likely to delay homeownership, which contributes to longer tenure among renters and higher renewal rates.
However, inflation and a lack of consumer confidence slow new rental demand, Chang said.
“We’re seeing a new peak of young adults living with their family for longer, but at some point, inflation will slow and economic growth will unlock a massive demand for apartments from these young people wanting to move out,” Chang said. “When we get to the next phase of stability, we’ll see absorption rates speed up again.”
Supply Side Dynamics and Financing
Government data from the Census shows strong multifamily starts, but Chang said data from private sources such as Yardi, CoStar and RealPage show a pullback in multifamily construction. Chang said that government data uses an outdated methodology based on samples, while the private companies count individual units under construction and more likely to be accurate.
“Deliveries during the first half of 2026 are roughly half of the deliveries during the first two quarters of 2024,” Chang said.
Over the next couple of years, construction and labor costs will be a barrier to more multifamily construction because of the impact of tariffs and immigration policies, he said.
While the NMHC survey data revealed worsening conditions for both debt and equity financing, Chang pointed out that liquidity is good.
“There’s plenty of capital available, but with rates higher, it’s hard for buyers to make deals work,” he said. “The good news is that banks are getting more active in anticipation of more deregulation.”
Chang believes that supply and demand dynamics will flip, which has not been priced into the market yet.
“If you can make the skinny margins work now, there’s a strong buying opportunity,” he said. “Investors looking at the multifamily market realize that interest rates are not permanent, but the real estate value is still there and the demand drivers look positive for the next several years.”
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