Multifamily

Demand Has Held Up

Renters kept arriving through the supply wave. Net absorption reached 124,600 units in the second quarter of 2026, the fifth-highest quarterly total in nearly 25 years and the strongest since mid-2024. Over the trailing four quarters, absorption of roughly 362,000 units exceeded new deliveries of roughly 358,000, the first time demand has outrun new supply on that measure since early 2022.

The South led, absorbing more than half of the national total in the second quarter. Dallas-Fort Worth, Phoenix, Atlanta and Austin each filled more than 13,000 units in the first half of the year.

Vacancy Has Turned, Fastest Where Building Ran Hottest

Occupancy is the first thing to recover in a rental market, and it has started to. National vacancy fell 35 basis points in the second quarter to 8.9%, the first meaningful decline after more than a year in a narrow band. In the South, where most of the new supply landed, it fell to 11.0%.

The recovery is fastest in the markets that built the most. Of the 20 markets that expanded their inventory most since 2019, 18 posted a vacancy decline in the second quarter, averaging roughly 90 basis points, nearly three times the national move. Over the past year, Huntsville and Charleston each shed about four points of vacancy.

Vacancy measures differ by provider, sometimes by several points, because each counts lease-ups and property types differently. RealPage, which tracks stabilized institutional buildings, put national occupancy at 95.5% in August 2026. The level depends on the measure; the direction is what matters, and the major series now point the same way.

Occupancy: Source: RealPage, August 2026 U.S. Data Update. Market estimates, not Videre results.

Class C Has Absorbed the Pressure

The recovery is not arriving evenly. In the South, Class A rents rose 0.3% in the year to the second quarter of 2026, while Class C rents fell 4.5%, the deepest Class C cuts since the global financial crisis.

The usual explanation is a chain of concessions. New Class A buildings in lease-up offered weeks of free rent, which drew residents up from Class B; Class B cut rents to hold occupancy, and the pressure landed on Class C, whose residents have the least room in their budgets.

For a Class B and C buyer this is the most important fact in the market, and we treat it as one. We buy where the rent gap to new construction is wide enough that concessions down the street do not empty our buildings, we verify collections lease by lease before closing, and we price today’s weakness into the basis rather than underwriting a rebound.

Renting Is the Rational Choice, and Residents Are Staying

Homeownership has moved out of reach for a large share of renter households. Buying now costs roughly twice as much per month as renting, a 105% premium. The country is short an estimated 3.4 million single-family homes, and more than half of the $13 trillion in outstanding mortgages carry rates below 4%, which keeps existing owners from selling and starter homes off the market.

Renters are responding by staying put. Renewals now account for 57% of all leasing activity, up from 51% in 2015 and 48% in 2005. Every renewal avoids a turn, a vacancy and a concession, which makes retention one of the most valuable things an operator controls.

Entry Pricing Has Reset

Apartment values fell sharply as interest rates rose. As of June 2026 they stood about 19% below their 2022 peak, up just 3% over the prior year. Today’s buyer pays a basis that already reflects higher rates, rather than one set when money was nearly free.

We do not underwrite a return to peak pricing, and we do not need one. The reset matters because it lets us buy older buildings at a basis per unit and per square foot well below the cost of building new, and that gap is the margin of safety in this strategy.

What Comes Next

Rental recoveries follow a sequence. Occupancy recovers first, then rents on new leases stop falling, then concessions burn off, and only then does pricing power reach renewals. Our read is that Class B in the Southeast has moved through the first two stages and is entering the third.

National asking rents grew 1.5% over the year to the second quarter of 2026, up from 1.1% in the first quarter, the first acceleration since rent growth began softening in mid-2025. CBRE projects 1.4% rent growth for 2026 and a five-year compound rate of 2.8%. Cushman & Wakefield expects vacancy to keep tightening and rent growth to strengthen over the next twelve months, with development near its cyclical trough.

The forecasts are measured, which suits a strategy that does not depend on them. We underwrite rent growth at or below them. If the recovery runs faster, our partners keep the upside; if it stalls, the plan does not depend on it.