2026 is shaping up to be a transitional year for the multifamily industry, with 2027 and 2028 being set up for success, says Greg Willett, chief economist at LeaseLock.
After attending the National Multifamily Housing Council’s Annual Conference at the end of January, Willett is weighing in on some of the themes that dominated conversations.
“There were positive vibes from people who are on the investment side of the industry. There’s more capital available, and it looks like deals are going to be flowing at a more significant pace than the last couple of years,” he says. “If you’re on the operations side of the business, they are expecting another challenging year. There’s a little bit less optimism there.”
Class C Concerns
Willett is paying close attention to the Class C space. While high-end and middle-market portfolios are performing well, he says he is seeing signals of likely distress in Class C.
“We don’t know what is going to happen with the Class C space where performance is deteriorating significantly. If you’re in a market that is immigrant heavy, and these are key residents in the Class C product, there are legitimate concerns about what may lie ahead,” he notes.
With a lot of Class C product built in the 1980s wave of construction in Phoenix, Florida, and Texas, those are places where that segment of the market could struggle in the short term, according to Willett.
“Operators of lower-tier properties will need to deploy a heads-on-beds strategy and should pay close attention to expense levels at a time when revenues could be compromised,” he adds.
Supply and Demand
Willett says the industry is starting to see some green shoots in the Sun Belt markets that have been overbuilt.
“Looking at how much the new supply comes down in some of those spots, we could see some real progress over the course of the coming year,” he says. “A half-dozen metros that have been right at the top of the leaderboard for new supply over the last three years are going to see at least a 40% drop in completions this year. That really positions them to begin to regain some momentum. These are spots that have rent cuts now so regaining momentum maybe just means you get to zero, but that’s still progress.”
However, he shares that there is concern around what demand will be like this year overall. Part of that reflects the slowing of the economy, but he highlights the rising unemployment rate for young adults, who are an important piece of the renter audience.
“Our current unemployment rate for young adults is 10.4%. That’s versus 9% a year ago and 8% two years ago. That suggests that a lot of young adults are back in that pattern where they are home with mom and dad rather than forming their own households. That’s a challenge on the demand front,” he says. “Immigrants are a big source of demand, too. So I think there are questions about the demand number this year that people are concerned about.”
Paying Attention to Data
Willett says another area to watch is the relationship between renewal lease pricing and move-in lease pricing.
He says the industry has been aggressive on renewal lease prices for the past three years, but now it’s becoming more expensive to stay in place than it does to move.
“Are we going to pull back on renewal lease pricing, or are we just going to let turnover tick up a little bit from where it has been? It’s not a disaster, but I think you have to pick one or the other. You get a little bit less aggressive on the renewal lease pricing, or you let turnover increase at least slightly,” he says. “I don’t think we can repeat the numbers that we saw over the last couple of years.”