Multifamily market outlook: Resilience despite market softening

Acquisition and refinance loans are readily available to qualified borrowers

Key takeaways

• Multifamily demand remains strong, supported by ongoing housing affordability challenges.
• New supply has softened market conditions, but rent growth and absorption remain positive.
• Construction activity is slowing as developers face higher labor and material costs.
• Aging apartment stock is driving renovation and capital needs.
• Liquidity has returned to the market, with acquisition and refinance financing readily available for qualified borrowers.
• Loan maturities are fueling refinancing and transaction activity, despite higher interest rates.

Over the past decade, multifamily real estate has proven its durability. As an essential category of housing, demand has remained resilient for years, even through the pandemic and bouts of economic uncertainty.

“Much of that resilience traces back to housing affordability and growing barriers to homeownership in the U.S.,” said Troy Marek, head of Real Estate Capital Markets at Regions Bank. “With so many households priced out of the for-sale home market, renters are staying in apartments for longer than in the past.”

New supply tests the market’s absorption capacity

Despite multifamily’s overall positive performance, the sector has shown some signs of softening, driven largely by a surge in new supply. In 2024, the biggest annual volume of new apartment units hit the market since 1986, with 608,000 units completed, as revealed in a 2026 Joint Center for Housing Studies of Harvard University report. In 2025, an additional 488,000 new units were delivered.

The market is still working to absorb all the new supply. According to recent Yardi Matrix multifamily reporting, rents continued to rebound in August, rising $2 per month on average to $1,773. Rent growth year-over-year was 0.4%, with Gateway and Midwest markets performing best, including San Francisco at 6.1%, New York City at 5.3%, Kansas City at 3.0%, Chicago at 2.6% and Twin Cities at 2.4%. However, select Midwest markets did demonstrate a slight slowdown.

Notably, new unit absorption is occurring alongside a slowdown in both construction lending and new construction starts, as builders contend with skyrocketing costs and labor constraints. According to the recent Harvard University report, between January 2020 and December 2025, the price for all material inputs for residential new construction increased 42% — a sizable jump when compared to the 7% increase seen in the prior five years, from 2014 to 2019. Labor costs have climbed, too. The employment cost index for private industry construction workers rose 24% between January 2020 and December 2025. As the current supply glut absorbs and occupancies rise, construction loans and activity are likely to tick back up, though how much remains unclear.

Aging apartment stock creates new investment needs

New construction is a critical contributor to the sector’s ability to serve American households, but so is existing apartment stock, which the Harvard study reports is now the oldest on record. The median age of apartment units reached 45 years in 2023, and approximately 3.6 million households, or 8% of the country’s renters, now live in moderately or severely outdated rental homes. Addressing the upkeep and upgrade of these units is critical, but that effort itself is squeezed by inflation and the rising cost of building materials and labor. Slowing rent growth and tightening net operating income only add to the challenge, making it harder for owners to keep existing stock properly maintained.

Financing conditions improve for qualified borrowers

Finance availability is another key factor in addressing the renovation needs of both aging and newer rental communities. The good news is that after a slowdown in 2023 and 2024, multifamily lending is rebounding, with abundant liquidity now accessible to qualified owners. A 20% increase in 2026 multifamily loan purchase caps for Fannie Mae and Freddie Mac, to $88 billion for each GSE, is a positive sign for the market. Banks have also become more competitive with their multifamily loan offerings. Multifamily lending volumes are expected to increase again this year, even as interest rates remain markedly higher than their record lows during the pandemic.

One key driver of lending activity today is the continued wall of multifamily loan maturities. Many of the impacted properties were originally financed during the pandemic’s low-interest-rate environment. With so many of these loans coming due, refinance loan activity is unsurprisingly on the rise. However, with today’s rates significantly higher than those on the maturing loans, owners refinancing need to bring more cash to the deal. For some, the math simply doesn’t pencil, and selling is proving the better option. As bid-ask spreads tighten, sale transactions, and the acquisition lending supporting them, are both increasing.

Interest rates will continue to play a central role in the multifamily sector this year. On September 16 the Federal Reserve, in a unanimous vote driven by persistent inflation, raised rates for the first time since 2023. The hike increased rates a quarter of a percentage point, putting them at a level between 3.75% and 4%. Credit spreads remain relatively stable and close to a five-year low, debt options are readily available, all-in rates are reasonably attractive, and the multifamily sector continues along its positive trajectory.

Looking to finance your multifamily community?

If you are looking for acquisition or refinance loan options for your apartment community, the Regions Real Estate Capital Markets team is here to help. Regions is an approved lender partner to Fannie Mae, Freddie Mac and HUD and assists borrowers and properties located across the country. Explore our multifamily loan program options and contact us today.