The national multifamily vacancy is estimated to increase to 8.8% by the end of this year before easing to 8.4% at the end of 2027, according to a revised forecast from Apartments.com, a division of CoStar Group (NASDAQ: CSGP).
Apartment rent growth is predicted to inch up from 0.2% in the first quarter of this year to 0.5% in the second quarter, an upward revision of 10 basis points from the previous forecast. The projected metric for the fourth quarter, however, was lowered slightly from +0.6% to +0.5%.
“The near-term rent growth outlook was maintained after modest first-quarter rent trends fell in line with expectations,” said Grant Montgomery, national director of multifamily analytics at CoStar Group. “However, projections for the second half 2026 were lowered due to softer employment assumptions and the sizeable backlog of excess inventory accumulated across the last two years, which must be absorbed before market conditions can meaningfully tighten.”
“The balance of risks remains tilted to the downside,” continued Montgomery. “A near-term energy price spike has eroded consumer spending power, and economists have downgraded employment growth expectations due to significant changes in U.S. tariff policy, slower labor force growth, and increased productivity that allows output to expand with fewer new hires.”
Separately, the National Association of Home Builders (NAHB) reported mixed first quarter results for its Multifamily Market Survey.
The Multifamily Production Index (MPI), which measures builder and developer sentiment about current production conditions in the apartment and condo market on a scale of 0 to 100, had a reading of 44, unchanged year-over-year.
The Multifamily Occupancy Index (MOI), which measures the multifamily housing industry’s perception of occupancies in existing apartments on a scale of 0 to 100, had a reading of 69, down 13 points year-over-year.
“Multifamily developer sentiment is roughly where it was at this time last year, although the combination of regulatory hurdles, interest rates, insurance costs and volatility in material prices is threatening the viability of some projects,” said Kip Lewis, director of construction management at OCCH in Columbus, Ohio, and chairman of NAHB’s Multifamily Council. “Also, in some markets, developers are reporting that it has become more difficult to obtain permits for unsubsidized projects.”
“The MPI and MOI continue to show that the market for garden and low-rise apartments typical of outlying areas is stronger than the market for mid- and high-rise apartments,” added NAHB Chief Economist Robert Dietz. “The gap is narrowing year-over-year for new multifamily construction, however, while widening for the occupancy of existing apartments. NAHB is projecting that multifamily starts will increase slightly in 2026, but current production rates are unlikely to be sustained through 2027.”
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