The apartment market is in a better place than it was earlier this year, but the recovery remains uneven.
CoStar reports that U.S. apartments absorbed 508,020 units over the past 12 months, compared with 452,947 units delivered (as of August 2026). Vacancy has declined to 7.9%, and national asking rent growth has improved to 1.3%. Demand strengthened in the second quarter too, with roughly 168,000 units absorbed, up 17% year over year and the strongest quarterly performance since the third quarter of 2021.
The forward supply picture is improving. Deliveries are coming down from the 2024 peak, and construction starts have fallen to their lowest level in more than a decade. CoStar expects rent growth to improve gradually as completions continue to decline, with more of the improvement weighted toward late 2026 and 2027.
Gradually is the important word.
CoStar reports 19 of the top 50 apartment markets still have negative annual rent growth. Markets that received the largest wave of new supply are still working through vacancy, concessions, and lease-up pressure. San Antonio remains one of those markets, with annual rent growth down 3.3%, although recent absorption and leasing momentum have improved.
Capital markets tell a similar story. Capital is available and interested in multifamily, but it is being deployed selectively. CoStar reports approximately $123.9 billion in trailing 12-month multifamily sales volume, with the national market cap rate at 6.2%. Values have stabilized after the correction from the 2022 peak and now sit around ~20% below peak levels.
Still, transaction momentum has cooled from earlier gains. CoStar notes that June and July saw both dollar volume and transaction counts fall below last year’s levels. A thinner supply pipeline helps the operating outlook, but acquisitions still run through the debt market. With rent growth modest and Treasury yields in the mid-4% range, financing costs continue to set the limit on what buyers can pay.
Underwriting remains difficult. If a property trades at a cap rate that is too close to, or below, the all-in cost of debt, leverage can work against current cash flow. For more acquisitions to pencil, the market usually needs one of three things. 1) Lower borrowing costs, 2) Lower purchase prices, or 3) Stronger property income. Until one of those changes, buyers and sellers are likely to remain apart, and transaction activity will continue to clear selectively rather than broadly.
For Steadfast, the standard remains strong conviction. We are patiently looking for assets and submarkets where the current income, debt costs, purchase basis, and operating plan work under today’s conditions.
The market is improving, but improvement alone does not create a good acquisition. We continue to favor markets with long-term demand, job growth, and renter depth, while remaining disciplined on basis and timing. In this part of the cycle, buying below replacement cost, protecting occupancy, and controlling operations carry more weight for us than assuming broad rent growth will solve a business plan.
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Disclaimer: The information provided in this article is for informational and educational purposes only. It is not intended to serve as investment, tax, or legal advice, nor should it be interpreted as an offer to buy or sell any security. Private real estate investments carry significant risks, including the potential loss of principal, and are intended for accredited investors who understand and can bear those risks. Any discussion of tax treatment relates solely to the property-level structure and does not reflect or predict individual investor outcomes. Tax implications vary based on each investor’s circumstances, and readers should consult their own financial, legal, and tax advisors before making any investment decision.
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