Article originally posted on AZ Big Media on Oct 19 2026

As elevated mortgage rates continue to make homeownership more expensive, Arizona’s multifamily housing market could benefit from renters staying in apartments longer and a slowdown in new residential construction, according to a new research report from Marcus & Millichap.

The commercial real estate firm’s October 2026 Housing Research Brief suggests that rising borrowing costs are creating a shift in housing demand that could favor apartment owners and investors, particularly in growing markets such as metro Phoenix and Tucson.

With mortgage rates exceeding 7%, many prospective homebuyers are postponing purchases, while existing homeowners with lower mortgage rates are reluctant to sell. That combination is limiting housing mobility and potentially extending the time households remain renters.

According to Marcus & Millichap, the share of renters renewing their leases reached 57.6% in September, more than 5 percentage points above the average recorded between 2015 and 2019.

For Arizona apartment operators, that trend could translate into more stable occupancy and reduced turnover.

Higher borrowing costs reshape housing demand

The report identifies interest rates as a major factor influencing housing decisions nationwide.

The Federal Reserve’s September rate increase pushed its target range to 3.75% to 4%, while the average 30-year mortgage rate reached 7.28% as of Oct. 1.

Those elevated financing costs are making homeownership increasingly difficult for first-time buyers while reinforcing the financial advantages of staying in existing homes or rental properties.

In Arizona, where housing affordability remains an important concern, the national trends could help sustain apartment demand even as economic uncertainty influences household budgets.

However, Marcus & Millichap cautions that higher interest rates could also constrain rent growth by slowing hiring and household formation.

Construction slowdown could benefit existing apartments

Another important finding involves the shrinking residential construction pipeline.

Nationally, seasonally adjusted residential building permits in August remained more than 25% below their early-2022 peak, while housing completions declined to their lowest level since late 2018.

Higher borrowing costs, combined with expensive labor and construction materials, are making new residential development increasingly challenging.

For Arizona’s multifamily sector, a slowdown in future apartment construction could eventually reduce competition for existing properties.

That could be particularly significant in metro Phoenix, where substantial apartment development in recent years has increased competition among landlords.

As fewer projects enter the construction pipeline, existing apartment communities could benefit from a more favorable supply-and-demand balance.

Homebuilders are also adjusting their strategies to attract buyers.

The report found that 66% of homebuilders nationally offered sales incentives in September, including mortgage-rate buydowns and closing-cost assistance, while 38% reduced prices.

Despite those incentives, builder confidence declined to a one-year low.

Apartment investors could find new opportunities