The most recent survey of members of the National Multifamily Housing Council finds a nearly even split on whether conditions are getting better or worse in their markets for multifamily developers and operators, according to the Q2 2026 State of the Multifamily Market Survey results presented by the NMHC at their April 23, 2026 webinar.
The Market Tightness Index was 49, just below the breakeven point of 50, but an improvement over the first quarter’s score of 32. Anything under 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. The score was nearly an even split, with 52% of respondents indicating that their market conditions were unchanged and 23% saying that conditions improved over the previous three months, up 7% since the first quarter. In addition, just 24% said that their market conditions were worse – a significant drop from the 43% who believed conditions were worse in the January survey.
Sales volume improved slightly, with an index of 52, up from 47 in January, which indicates an increase in deal flow. On the financing side, the debt financing index dropped to 51 from 75 in the last quarter, which indicates that while borrowing conditions continue to improve, there is more variation depending on local markets. The equity financing index dropped to 49, just under the breakeven point, after two consecutive quarters above 50, which indicates less availability of equity investments.
These second quarter responses align with research by Jay Parsons, a rental housing economist with Jay Parsons Research and JPI.
“In the beginning of the year, there was a perception that this would be not a great year but not a bad year in terms of deal flow and starts, with the second half of the year expected to be better than the first half,” Parsons said. “Now that we’re in the second quarter of the year, we’re seeing a little more tapered expectations for the summer months and the rest of the year. Not dramatically different, just modestly lower expectations.”
While inflation and the war in Iran have an impact on economic forecasts and the multifamily market, Parsons said that these issues mostly have slowed momentum for deals and starts.
“A bigger issue is that we’re not seeing any real rebound in rents, which may be even more important than a slight increase in interest rates,” he said.
Overall, Parsons believes the worst phase for the multifamily market is now past.
“We’re just recovering at a slower pace,” he said. "It feels like we’re in this stage where it’s not getting worse, but it’s not getting better really fast either."
Debt and Equity Financing
Parsons said he hasn’t seen material change in the debt market, which tracks Federal Reserve surveys that show lenders have not tightened their willingness to loan in the last few years.
“The story of this year is that it’s easy to find debt as long as you can afford it, but it’s hard to find equity financing,” he said. “Investors hate uncertainty, and what we’re seeing in the Middle East, with gas prices, and the economy equals uncertainty.”
Another issue that Parsons believes contributes to limited equity investments in multifamily properties is weak job numbers, which affect demand.
“Also, investors are waiting for rents to rebound,” he said. “Investors want a clear indication of momentum in rent, but mostly we’re seeing ‘ho-hum’ rent numbers this spring.”
Supply Side Impact
Lower job growth and low immigration over the past year have influenced multifamily demand, Parsons said, but he believes the lack of a rent rebound is more of a supply issue rather than about demand.
“Absorption rates are still above average even though we’re still adding a good number of apartment units,” Parsons said.
Demand remains strong in markets with high supply, even though rents are being cut there, he explained. In the top 15 markets with rent growth, the median supply growth is just 0.5%, while in the 15 markets with rent cuts, supply is up 5%, according to Parsons, which indicates that rent cuts are impacted more by supply than demand.
“People are coming into the market and we’re adding more renters,” he said.
Parsons estimates that there are still 600,000 units in lease-up, part of the prolonged supply increase since 2024 that is taking a little longer than expected to be absorbed.
An issue tied to supply and demand, particularly in markets where rents are being cut, is tenant retention. In some high supply locations such as Austin, Denver and Phoenix, rent growth is carried by renewal rents. However, this creates tension when existing residents become aware that they’re paying more than new tenants. In some cases, the rent gap for similar units can be as high as 5% to 10% when renewal rates are raised by 2% to 3% and new leases are offered at a lower rent, Parsons said.
“Tenants are smart and can look up what the rents are for similar units, and if they get frustrated by this, that can hurt the reputation scores for the owner or the building,” Parsons said. “Some people move out or move from one unit to another because the owner wouldn’t work with them on the rent, which leaves the owner with turn costs and a lower rent.”
Risk Assessment
While supply issues, lower job growth and inflation are all issues that fluctuate and get resolved in cycles, Parsons said that the number one risk the multifamily sector faces now is rent control proposals.
“If you’re playing the long game as an investor, other issues work themselves out, but policy risk can be sudden and have long-term implications,” he said. “We’re seeing more places consider rent control even at a time with low rent growth. The problem is that places that have passed rent control, such as Montgomery County, Maryland, are basically off everyone’s radar now for new development.”
Parsons recommended that investors look for locations with a lower likelihood of major policy changes.
“The problem is that many people have a sense of urgency around affordability right now, but that ignores the bifurcation of the affordability issue,” Parsons said.
A rent cap on a $2,500 apartment that renters earning a good income can afford doesn’t help low-income renters, he explained.
“Plus, it backfires by ultimately reducing supply, which makes it harder for everyone to find an affordable home in the future,” Parsons said.
The information provided in this article, including, without limitation, any opinions, predictions, forecasts, commentaries or suggestions, is for informational purposes only and should not be construed to be professional or personal investment, financial, legal, tax or other advice.