Steadfast's Predictions for 2026 for Apartment Investors

Key Points:

• Supply risk will depend on whether new apartments can still be built, not how many were delivered in the past two years.
• National rent growth is expected to recover gradually, averaging roughly 1–3% annually depending on location, as the market moves through late 2026; property performance will therefore depend more on renewals, expense control, and execution than on rent increases alone.¹
  
• Many actionable acquisition opportunities will come from capital structure stress rather than weak property fundamentals.

Entering 2026, the apartment market is adjusting to the aftereffects of elevated supply and higher borrowing costs. New construction has slowed, financing is more restrictive, and buyers should expect more competition for well-priced, well-located assets.

For investors, outcomes will depend less on market averages and more on how supply, rents, and capital interact at the asset and submarket level.

Three conditions are likely to shape apartment investment outcomes in the year ahead.

Prediction One: The ability to build will matter more than the amount already built

Over the past year in 2025, the apartment market added more units than it absorbed. That excess supply explains why leasing has slowed, concessions remain common, and rent growth has been limited in many markets.

That observation, however, is backward-looking. It explains current softness, but it does not explain what happens next.

To understand 2026, a different question matters more: how likely is it that new supply shows up in this submarket during your hold period?

On that front, the picture has changed. According to CoStar, apartment construction starts have fallen to their lowest level in more than a decade, and projected deliveries for 2026 are expected to be roughly half of what the market delivered at the 2023–2024 peak. This is not a temporary pause. In many markets, the cost to build now exceeds what current rents can support, particularly after financing costs are considered. When projects do not pencil, they do not move forward.

This aligns with broader industry expectations that new apartment supply in 2026–2027 will be among the lowest levels seen in more than a decade, even as demand normalizes.

This is where markets begin to diverge.

In high-barrier markets where land constraints, regulation, and construction costs limit new development, supply pipelines have thinned materially. Markets such as Chicago have far fewer units under construction as a share of existing inventory compared with recent high-growth Sun Belt metros. Once excess units are absorbed in these markets, supply pressure tends to ease and rental rates begin to climb.

By contrast, markets like Austin still carry larger pipelines relative to inventory and retain the ability to build again once capital market conditions loosen. In those markets, recovery often brings new competition.

What this could mean for investors

When you invest in an apartment deal, a key analytical question is: how much new competition will arrive while you own the asset?

So in 2026, the practical underwriting question becomes simple: Can developers realistically add a large number of new apartments in this submarket over the next two to three years?

If the answer is yes, the deal needs to work with conservative rent assumptions and the expectation of continued competition.

If the answer is no, the deal has a clearer path to improving occupancy and rent once the existing supply is absorbed.

In 2026, investors are not just underwriting today’s vacancy. They are underwriting whether new competition will come online during their hold period.

Prediction Two: Rent growth will return in some submarkets, but margins will stay tight

National rent growth slowed to near zero over the past year. That was not because renter demand disappeared. It was because the new supply gave renters more options, particularly at the higher end of the market.

The split by asset type matters.

According to RealPage, Class A properties accounted for the majority of new deliveries in 2023–2024 and experienced the weakest rent performance as a result.⁴ In contrast, workforce and attainable housing showed greater stability, with fewer concessions and stronger renewal behavior. In many markets, luxury properties are still using incentives to maintain occupancy, while mid-tier assets are holding rent more consistently.

Looking ahead, most forecasts point to modest rent growth in 2026, centered in the low single digits, consistent with expectations for a gradual recovery rather than a sharp rebound. RealPage’s national forecast is slightly higher at 2.3% effective asking rent growth in 2026, with only 11 of the 50 largest markets expected to exceed 3%.²

That improvement helps stabilize revenue, but it does not restore margins on its own.

The reason is cost.

Operating expenses remain structurally higher than they were before 2020. CoStar data shows expense growth has outpaced rent growth over the past several years, driven primarily by insurance, payroll, and maintenance.⁵ These costs tend to adjust slowly, even when revenue improves. As a result, a smaller portion of rent growth flows through to net operating income.

There is one stabilizing factor. Renewals now make up a larger share of leasing activity than in prior cycles.³

What this could mean for investors

In 2026, rent growth is likely to be slow and uneven, while operating costs are unlikely to decline meaningfully.

Because of that, investors should focus on whether a deal works without strong rent growth.

A useful way to think about it is simple:

If rents grow only 1–2% and expenses stay where they are, does the investment still produce acceptable cash flow?

If the answer is yes, the deal is more resilient.
If the answer is no, the deal depends on conditions improving quickly.

In 2026, durability — meaning the deal works even if nothing improves much — will matter more than the potential for upside. The potential upside will be analyzed in 2027 and beyond.

Prediction Three: Opportunity will come from capital structure, not broken properties

In 2026, most apartment opportunities will not come from weak demand or failing properties. In many cases, the real estate itself is still performing reasonably well.

The issue is financing.

Many apartments were financed under interest rates and valuations that no longer apply. As loans mature, some owners face refinancing terms that do not work with today’s income and borrowing costs. Maturity-driven loan defaults have been a dominant source of new stress in the market and elevated maturities extend through 2026 and 2027, which is why refinancing outcomes remain uneven.

In these situations, the problem is not occupancy or rent levels. It is that the capital structure no longer fits the property.

This changes where opportunity comes from.

Rather than broad market weakness, buyers are finding situations where assets need restructuring, additional equity, or more time to operate through the cycle. These are properties with sound fundamentals but limited flexibility due to leverage, loan maturity, or ownership constraints.

As a result, pricing differences increasingly reflect financing risk more so than market, operational, regulatory, or asset risks.

What this could mean for investors

In 2026, many acquisition opportunities are likely to come from assets where the financing no longer fits the property.

For investors, this means focusing on leverage, loan terms, and refinancing assumptions. Deals that rely on aggressive debt or quick capital market improvement carry more risk. Deals with conservative leverage and flexible structures offer more room to operate. In practice, this often means accepting lower initial yields in exchange for durability through refinancing and exit.

When a property’s operations are sound but its financing no longer fits, acquisition opportunities can emerge at prices below replacement cost.

Closing perspective

We expect that apartment investing in 2026 will reward deals that function under today’s conditions, because there would be less margin for error if assumptions prove optimistic.

A large amount of supply has already been delivered. Rent growth is modest. Capital is available, but refinancing outcomes are more sensitive to assumptions than in prior years. These conditions do not point to widespread distress, but they do narrow the margin for error.

In this environment, outcomes depend more on how individual deals are structured.

Investments that assume modest rent growth, ongoing expense pressure, and conservative financing tend to perform across a wider range of scenarios.

Investments that rely on several variables improving at once do not. This dynamic is likely to persist through at least 2027, as elevated loan maturities and muted construction keep outcomes uneven across assets.

At Steadfast Direct, our focus in 2026 reflects this reality. We will concentrate our acquisition and investment pipeline on assets that can support their capital structure under current conditions, with returns driven by execution and time. We are willing to wait when those conditions are not present.

Not every opportunity needs to be pursued. Buyers with flexible capital, longer time horizons, and conservative underwriting are better positioned than those reliant on near-term market improvement.

To learn more about Steadfast's Investment Strategy, read our Investment Thesis.

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Sources/Footnotes

1. Multifamily National Report, United States, CoStar, January 2026.

2.https://www.realpage.com/analytics/markets-forecast-rent-growth-2026/

3. https://www.globest.com/2025/10/22/retention-not-rent-hikes-is-sustaining-multifamily-revenue/