In a two-part episode of “Inside the Deal, a CRE Podcast by Berkadia®”, Berkadia's Ernie Katai discussed the realities shaping the multifamily market in 2026 with apartment economist Jay Parsons. Their conversation highlighted a market that remains resilient despite historical supply pressures, uneven capital markets, and cautious sentiment. Parsons argued that broad national narratives no longer explain performance as clearly as local market dynamics, asset quality, and operational execution.
Parsons stressed that many common narratives in the multifamily sector are oversimplified. He noted that apartments tend to perform best when the overall economy is strong, household formation is healthy, and consumer confidence is rising, underscoring how closely the multifamily market is tied to the general state of the economy. Although supply has been the sector's biggest headwind, demand has remained stronger than many anticipated.
If Parsons uses one word repeatedly, it is “resilient”. He described the current housing market as volatile and tenant-friendly, yet remarkably robust. Even after the largest surge in supply since the 1970s, national rent declines have remained relatively moderate overall, and vacancies have not deteriorated as much as many feared. Similarly, while valuations have fallen from their peaks, the worst-case scenarios for distress that many expected a few years ago have not materialised on a large scale.
Instead, the availability of debt and recapitalisations has allowed many owners to hold on longer than expected, mitigating a potentially more dramatic correction. However, this does not mean conditions are easy. Parsons characterised the current phase as a messy transition and recovery – an environment of “two steps forward, one step back”. Deals are being done, but not without obstacles. Operators, owners, and capital providers are operating in a significantly more demanding environment than during the boom years, when, according to Katai, the market was often described as “catching money with buckets”. Today's market rewards precision, patience, and operational excellence instead of mere momentum.
A key reason for this complexity is that the multifamily market in 2026 is no longer moving in a uniform direction. Parsons emphasised that interest rates still play a role, but the larger story is now local execution and asset specificity. Newer properties in strong submarkets continue to attract capital, often at lower spreads than many outsiders would expect. Older properties in weaker locations face a very different reality. It's not just about the metropolitan area, but often also the neighbourhood, the quality of the asset, and the precise business plan. The era where even weak strategies could be carried by a rising market is over.
This nuance also applies to demand. On the surface, several macroeconomic indicators might suggest a weaker environment: rising numbers of young adults living with their parents, uneven employment growth, lower confidence among university graduates, and low consumer confidence. Yet, absorption data tells a much stronger story. In fact, the first half of the year saw one of the strongest half-year absorption performances ever recorded – stronger than any year prior to COVID, according to Parsons. This discrepancy between perception and reality is crucial. Headlines may highlight caution, but tenants continue to form households and sign leases in large numbers.
However, supply remains the defining force. Parsons was unequivocal: supply has been the biggest headwind for the multifamily market in recent years, more so than any weakness in demand. But this story is also changing. Completions are now returning to more normal levels after the historical delivery surge from 2023 to 2025. In many markets, the discussion is shifting from current completions to what comes next. Parsons suggested that some of the long-term damage from this cycle may be exaggerated, especially for high-quality new constructions in strong locations. The longer-lasting pain could instead be concentrated on older Class C properties in oversupplied markets, where tenants have upgraded, and a flight to quality has left weaker assets behind.
In capital markets, the bid-ask spread has narrowed more than some waiting buyers might care to admit, at least for high-quality Class A properties in desirable submarkets. These properties continue to trade at aggressive prices, and many owners prefer to refinance or recapitalise rather than sell at significantly lower valuations. In contrast, distressed value-add deals in weaker locations continue to face much larger price discrepancies. For these properties, the reset is not yet complete. Distress is occurring but is concentrated – particularly in the category Parsons refers to as “broken value-add deals”, where assumptions made three or four years ago are now coming to light.
Operationally, too, the market rewards discipline. Parsons explained that today's outperforming properties are distinguished not only by location but also by execution. Tenants are showing a clear flight to quality, meaning maintenance, exterior presentation, tenant experience, and pricing realism matter more than ever. Properties that focus on occupancy are outperforming the market.
