The national multifamily vacancy rate is estimated to rise to 8.8% by the end of 2026 and peak in early 2027, according to a revised forecast from Apartments.com and CoStar. It then is expected to ease to 8.4% by the end of next year.
Apartments.com and CoStar also have revised apartment rent growth for the latter half of the year. While annualized rent growth is expected to increase from 0.2% in the first quarter to 0.5% in the second quarter, a 10 basis-point upward revision from its earlier forecast, expected rent growth was reduced slightly from 0.6% to 0.5% in the fourth quarter.
“The near-term rent growth outlook was maintained after modest first quarter rent trends fell in line with expectations,” says Grant Montgomery, national director of U.S. multifamily analytics at CoStar. “However, projects 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.”
Montgomery added that the “balance of risks remains tilted to the downside.”
“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.”
In addition to its updated vacancy and rent growth forecasts, Apartments.com and CoStar released its latest update on multifamily construction, which continues to show challenging market conditions for ground-up developments.
Apartment starts decreased to approximately 55,000 units nationwide in the first quarter, a 73% drop from the peak in early 2022 and the lowest quarterly level since 2011. Apartments.com and CoStar cited the slower rent growth, elevated financing costs, and higher development expenses as hampering deal feasibility.
With slowing starts, the national multifamily construction pipeline is shrinking. The number of units under construction decreased to approximately 579,000 in the first quarter, down more than 50% from its peak in early 2023.
Construction activity is not equal nationwide. The South and Mountain regions continue to have the highest construction exposure relative to inventory, at about 3.2% and 3.3% of stock under construction, respectively. New York City has the largest construction pipeline, followed by the Dallas-Fort Worth metroplex; Miami; and Charlotte, North Carolina, with over 6% of total apartment stock under construction.
“Developers have pulled back sharply as weaker rent growth and higher financing costs weigh on project feasibility,” said Montgomery. “While completions remain elevated now, the contraction in the construction pipeline points to more balanced supply conditions.”
Absorption is projected to decrease to 70,000 units per quarter, below its five-year pre-pandemic level. Completions of new units are expected to drop 28% this year to 382,000, followed by another 24% decline next year. This drop in inventory will set the stage for demand to outpace new supply by mid-2027.