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Rent Growth Could Break the Multifamily Bid-Ask Stalemate

Article originally posted on Globe St on Oct. 1 2026

The multifamily transaction market does not necessarily need a dramatic drop in interest rates to reopen. It may first need something more basic: enough confidence in future rent growth for buyers to stop underwriting apartment properties as if operating fundamentals will keep deteriorating.

That was the subject of a recent Walker Webcast conversation between Willy Walker, chairman and CEO of Walker & Dunlop and Ivy Zelman, co-founder and executive vice president of Zelman, a Walker & Dunlop Company.

The pair discussed a market in which demand for apartment investments exists, but buyers and sellers remain separated by a difficult combination of elevated financing costs, cap-rate pressure and uncertain revenue assumptions.

For now, many prospective buyers are approaching multifamily acquisitions with what Walker called “negative fundamentals.”

If a buyer assumes rents will be flat or fall, concessions will remain elevated and lease-up competition will persist, there is little room to stretch on price—particularly when the cost of debt remains high and cap rates are moving in the wrong direction.

But that arithmetic can change quickly. A buyer who can credibly underwrite even moderate revenue growth is valuing a different asset than one assuming another year of weakening rents. That shift could move bids toward sellers’ expectations, narrow the bid-ask spread and create the price discovery the market has lacked.

Negative Underwriting Holds Back Bids

The gap between a property’s current income and its expected future income is central to the transaction freeze. A deal can be financed and still not make economic sense if the buyer believes net operating income will be pressured after closing.

“Many people who are buying right now in the multifamily space are buying on, if you will, negative fundamentals,” Walker said.

“The moment that you start to project out rent growth in the pro forma … it is going to change the calculus immediately.”

That matters because transactions are forward-looking. Sellers often anchor to the value created during the low-rate, high-growth period or to the belief that temporary operating weakness should not define a long-lived asset.

Buyers, meanwhile, must account for today’s debt costs, the possibility of further cap-rate expansion and the risk that revenue growth will not arrive on schedule.

The result is a familiar stalemate. Sellers may prefer to wait rather than accept a price based on depressed near-term income. Buyers may be willing to transact only at values that compensate for an uncertain operating outlook. Properties can sit in the market even when there is no shortage of capital seeking selective multifamily exposure.

Zelman said the stronger argument for apartments increasingly lies in underlying renter economics rather than in an immediate expectation of lower borrowing costs.

“There’s demand, and we have demand supported by renter households accelerating,” she said. “We have very favorable affordability. The rent-to-income ratios are not really much above trend line.”

Her point is important for investors: multifamily may have a more resilient demand base than for-sale housing when ownership affordability remains strained. But that does not automatically translate into an active investment-sales market.

Buyers still need confidence that renter demand will show up in occupancy, concessions and effective rent growth.

Rent Expectations Shape Value

For apartment investors, a modest change in rent assumptions can have an outsized effect on pricing. A property acquired with no projected rent growth may need a lower purchase price to achieve the buyer’s return target. If the same asset can support positive growth, even at a restrained rate, the future cash-flow profile improves and so does the buyer’s willingness to bid.

That dynamic is especially important in a market where debt is expensive. Higher financing costs reduce leverage-driven returns and put more pressure on an asset’s operations to carry the investment. If cap rates rise at the same time, buyers face a double burden: more costly debt and a higher yield requirement at exit or in valuation.

“Underwriters today that are looking at transactions, they’re looking at cap rates going the wrong way because of where rates are,” Zelman said. “So I think we need to see rates kind of stabilized.”

Rate stabilization would help reduce one important source of uncertainty. But the webcast discussion suggested that a clearer rent-growth outlook could be equally meaningful.

In a market where many investors have been underwriting a weak revenue environment, the first credible evidence that rents are beginning to recover could alter the risk premium embedded in bids.

Zelman’s forecast called for U.S. multifamily rent growth of roughly 1.5% in 2026, accelerating to 2.6% in 2027 and 3.7% in 2028, though she cautioned that the outlook remains vulnerable if rates stay elevated and inflation does not ease.

The forecast is not a return to the unusually strong rent increases of the pandemic-era cycle. It is, however, a potential transition from a market defined by supply-driven pressure to one with a more workable operating backdrop.

For transaction markets, that distinction is critical. Buyers do not need a return to peak rent growth to re-engage. They need enough evidence to support underwriting that is less defensive than it is today.

Supply And Market Selection Matter

The recovery will not be uniform. Zelman described multifamily as oversupplied on a national basis, citing a national multifamily vacancy rate of 8.3%, while also emphasizing that national figures can obscure substantial differences among metros.

That creates a more selective investment environment. Markets with limited new starts and tightening availability may see rent pressure ease sooner than markets still working through a large construction pipeline.

Zelman pointed to San Francisco as an example of a market where years of limited starts have coincided with double-digit rent gains. She also said markets with constrained supply in the Midwest have continued to show healthier rent growth.

By contrast, some formerly favored Sun Belt markets may require more time. Zelman said Austin and other highly supplied markets could face another three-to-five years of oversupply absorption before rents meaningfully re-accelerate.

For buyers, that means the reopening of the transaction market may initially occur on a market-by-market basis rather than through a broad national recovery.

Assets in metros with improving occupancy, declining lease-up competition and a limited forward pipeline could receive stronger bids first. Markets where owners still must offer concessions to compete with newly delivered units may continue to face more conservative underwriting.

The supply picture is beginning to improve in some respects. Zelman said multifamily completions and starts have declined, while operators reported that lease-up competition was easing and the use of concessions had plateaued. She characterized the overall setup as gradually improving, even after July data showed a more-than-seasonal slowdown in occupancy and rents.

That is the kind of uneven but potentially meaningful change investors will be watching. The transaction market does not need every metro to recover at once. It needs enough examples of improved operations to make the case that the worst supply-driven pressure is passing.

The Bid-Ask Reset Begins With Credibility

The next phase of multifamily price discovery may therefore depend less on a single macroeconomic catalyst than on the convergence of several conditions: more stable debt costs, cap rates that stop moving higher, evidence that new supply is being absorbed and rent-growth forecasts that investors can defend in an investment committee meeting.

Zelman sees pent-up demand waiting behind those conditions.

“There’s a lot of pent-up demand in the transaction market that will be unleashed,” she said, whether the catalyst is improvement in long-term rates or greater confidence that rent growth will reaccelerate.

That does not mean a sudden return to the highly liquid, low-rate market of the previous cycle. Sellers may still need to adjust to values shaped by more expensive capital. Buyers will remain disciplined, particularly in markets where supply and concessions remain elevated. And the spread between the best-positioned properties and weaker assets could widen.

Still, a modestly better outlook for apartment revenue could be enough to alter the balance of power. If buyers no longer have to underwrite rent declines or stagnant income, they can justify stronger bids. Sellers, in turn, gain a clearer basis for accepting a price rather than waiting for a recovery that has not yet appeared.

The market’s first reopening may not be driven by a dramatic cap-rate compression or a sudden fall in borrowing costs. It may start with a simpler change: investors deciding that the future income stream is no longer getting worse.

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