National multifamily forecast calibrated as slower demand offsets falling supply

Article originally posted on CoStar on February 9, 2026

CoStar adjusted its U.S. multifamily forecast to reflect that stronger near-term rent growth last quarter is now expected to be offset by a modestly softer outlook for renter demand in the second half of 2026, resulting in the elevated vacancy rate declining at a slower projected pace.

Given that annual absorption, or the net change in occupancy, is projected to outpace a shrinking number of new units added to the supply by year-end for the first time in five years, 2026 is still projected to be a pivotal year. However, these countervailing forces are expected to keep vacancy elevated throughout 2026.

The forecast raises near-term rent growth expectations, reflecting firmer leasing trends and improved demand relative to earlier assumptions. However, the forecast for the latter part of the year was lowered, as the process of absorbing the excess supply is now expected to extend further into 2026.

As a result, the annual rent growth outlook is slightly lower than in the previous forecast, despite a stronger start to the year. Annualized rent growth is projected to slip from 0.4% in the fourth quarter to 0.2% in the first quarter of 2026, representing a 60 basis point upward revision from last quarter’s forecast. However, rent growth projected for later in the year was revised lower, with the fourth-quarter 2026 projection reduced from 1.0% to 0.6%.

The U.S. multifamily vacancy rate is projected to hold steady at 8.5% through year-end before easing slightly to 8.1% by the end of 2027. Stabilized vacancy is now expected to see a modest increase through mid-2027 as the market continues to absorb the excess inventory built up over the past two years.

The near-term upgrade in rent growth stems from stronger fourth-quarter rent trends. However, the lowered second-half 2026 rent expectations reflect projections for lower employment levels over the course of the year and the sizeable backlog of excess inventory accumulated across 2024 and 2025 that must be absorbed before market conditions can meaningfully tighten.

The average number of units absorbed per quarter is expected to cool to 80,000 units, just below the five-year pre-pandemic quarterly average, while the number of new units added this year is expected to fall by 36% to 333,000 units, and by another 27% in 2027. This dramatic decline in supply will finally set the stage for demand to outpace new supply over the next two years.

The balance of risks in the revised forecast remains tilted to the downside. Economists have downgraded employment growth expectations due to significant changes in U.S. tariff policy, slower labor force growth, and rising productivity that allows output to expand with fewer new hires.

Beyond the near term, these macro-economic pressures extend into the longer‑run demand outlook for apartment demand. Fiscal expansion from mid-2026 to early 2027 could boost the economy. But lower immigration is expected to constrain labor force and employment growth through 2030, weighing on long-term demand for rental units.

Population growth and household formation are also projected to remain subdued throughout the forecast period. As a result, the U.S. multifamily vacancy rate is forecast to decline only modestly over the next five years, with rent growth averaging 1.5% annually, trailing historical levels.