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Yardi Sees Apartment Values Under Pressure Through 2027

Article originally posted on Globe St on Oct 7 2026

Yardi Matrix expects apartment rents to hold up with only a limited drop-off in the final quarter of 2026, setting the stage for a gradual national recovery. But improving rents may not be enough to lift property values: Higher financing costs could keep valuations under pressure throughout 2027.

That split outlook emerged during Yardi Matrix’s recent multifamily webcast presentation, featuring Jeff Adler, vice president of Yardi Matrix, and Paul Fiorilla, its director of research. For investors, the prediction is a double-edged sword: A rent recovery may improve cash flow without lifting property values or refinancing proceeds.

A Steadier Year-End Outlook

Yardi’s outlook calls for roughly 1% rent growth in 2026, with Adler describing the recovery as better than he had expected. He anticipates little deterioration in the final quarter, followed by gradual national improvement rather than a sharp rebound.

The recovery remains uneven. San Francisco and Chicago lead Yardi’s 2026 rent-growth forecast, while Austin, Phoenix, and Denver continue to face near-term pressure. The Northeast and Midwest are generally performing better than supply-heavy Sun Belt markets, but Yardi expects rent growth in both stronger regions to moderate in 2027.

Over time, Adler described rent growth running about 100 basis points above inflation as desirable. Getting there, however, will require markets to work through the apartments still competing for tenants. Lease-up inventory has declined from its peak, but remains elevated, and concessions are still widespread.

That helps explain why healthy demand has not produced a faster rent recovery. In markets with substantial lease-up inventory, newly occupied apartments reduce the supply overhang before landlords regain much pricing power. Markets with less competing inventory can translate even modest demand gains into higher rents more quickly.

Recovery Will Vary By Market

For the Sun Belt, the early improvement is more about smaller declines than a return to strong increases. Adler described rents as still falling in some markets, but at a slowing rate—the beginning of a recovery, not its completion.

Renewals have helped soften the damage. When Yardi combines new-lease rents with renewal performance, its outlook shows modest revenue growth across much of the Sun Belt, with Austin and Phoenix identified as exceptions in 2026. Even those markets are expected to recover over time.

That support is becoming less reliable. Fiorilla said renewal rent increases were flattening in many markets after helping owners compensate for weaker new-lease performance. The shift is worth watching because renewals have been an important source of financial stability during the supply wave.

Yardi’s forecast therefore points to a measured recovery, not a broad surge in rents. The Sun Belt still has inventory to absorb, while the Northeast and Midwest face slower growth in 2027. And the projected revenue improvement comes before the added burden of refinancing at higher rates or carrying floating-rate debt.

Values Face Another Difficult Year

Those financing costs are the central obstacle to a recovery in property values. Adler expects valuations to remain under pressure throughout 2027, including for properties approaching refinancing after a decade of ownership.

He cited Yardi’s statistical work suggesting that a 25-basis-point rate increase corresponds to an approximately 3% decline in property value. On that basis, he estimated that a recent 50-basis-point rise in the 10-year Treasury yield had reduced values by roughly 6%.

The implications extend beyond already troubled properties. Adler said higher borrowing costs have narrowed the pool of viable value-add deals in the Midwest, despite the region’s comparatively strong rental performance. In the Sun Belt, the same financing pressure could push more stressed properties into difficulty.

The hoped-for transaction rebound also looks elusive. Adler expects sales volume to increase as year-end closings arrive, but doubts that 2026 volume will exceed 2025. He considers a result closer to 2024 levels more likely.

Fiorilla described a market increasingly divided between high-quality Class A properties bought with little or no debt and distressed transactions. Between those groups are sellers who have been waiting for lower rates to support their asking prices and may now have to wait longer.

Rate Relief May Come Late

Adler sees a possible opening for lower short-term rates near the end of 2027, provided inflation eases enough. That is a conditional prospect, not an assumption that borrowing costs will fall soon. In the nearer term, he expects another 25-basis-point rate increase in December 2026.

He is more cautious about long-term rates. Adler said the 10-year Treasury yield could potentially retreat to 4.5%–4.75%, but he does not see a return to 3.5%. Even the more plausible decline would largely bring long-term yields back to levels seen a few quarters earlier, rather than establish a substantially cheaper financing environment.

As a result, he expects investment opportunities to shift toward stressed and distressed assets, construction-loan maturities and other refinancing situations. Traditional value-add deals could become harder to execute as financing costs absorb more of the potential return.

The pressure could extend beyond 2027. Adler pointed to loans maturing through 2030 and expects refinancing into a higher-rate environment to bring additional properties to market in 2028–2030. For buyers, the opportunity may come less from a rapid rent rebound than from an owner’s need to resolve a maturity—even as the property’s rental performance improves.

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