Multifamily isn't one market anymore. It's two.
Sun Belt and Mountain multifamily are still working through a 50-year supply wave. The Midwest and gateway markets look healthy. The national headline number is an average of two different stories.
Same asset class, opposite years
Sun Belt and Mountain markets are still working through what CBRE describes as the lingering effects of a 50-year-high wave of new multifamily supply, and it's still weighing on occupancy and forcing operators to compete on price for new tenants. In markets like Austin and Denver, asking rent growth is projected to stay negative through 2026. Across high-supply markets generally, positive asking rent growth has been pushed out to late in the year.
The Midwest and certain gateway cities are telling a different story. Fundamentals there have stayed healthier through the same period, without the multi-year supply overhang that Sun Belt metros are still absorbing.
Why the aggregate numbers hide the real story
Cap rates are expected to stay broadly stable in 2026, with incremental compression in the years after, and cap rate spreads remain tight across the sector. That's the number that shows up in a national multifamily report. It's also a blended average sitting on top of two markets moving in opposite directions, and a sponsor underwriting a specific asset in a specific submarket isn't buying the average. They're buying whichever side of the split their asset happens to sit on.
Capital is coming back, but it's rotating, not flooding back in
CBRE is forecasting a 16% increase in investment volume for 2026, and 2025 saw the most confidentiality agreements executed with prospective buyers since 2022, real signals of renewed institutional demand. But the opportunity CBRE describes isn't a blanket return to Sun Belt multifamily. It's framed as disposing of assets in the oversupplied markets to realize gains, then redeploying that capital into markets where supply and demand look more balanced as 2026 progresses. That's a rotation between two different multifamily stories, not a rising tide lifting both.
What this means for underwriting
Returns in this environment are going to be income-driven rather than appreciation-driven, which puts more weight on market selection and asset management than it has in years where a rising tide covered for a mediocre thesis. In practice, that means a sponsor's lease-up or absorption timeline for a Sun Belt asset needs to be specific to that submarket, not borrowed from a national multifamily deck. And for LPs and family offices allocating fresh capital right now, the question isn't "is multifamily a good sector." It's which half of the multifamily story a specific deal is actually in, and whether the sponsor's plan accounts for that.
Where we help
We underwrite deals market by market, not against the national headline. That means pressure-testing a sponsor's absorption timeline against what's actually happening in that submarket's supply pipeline, and structuring debt and equity around the actual risk of the specific asset rather than the sector-wide average.