Housing at a crossroads: Navigating uneven demand and a delayed recovery

The housing market is not lacking demand; it is navigating a period of uneven distribution.

That was a central theme from Walker & Dunlop’s recent Walker Webcast, featuring insights from Kris Mikkelsen, EVP and Co-Head of Capital Markets at Walker & Dunlop; Ivy Zelman, EVP and Founder of Zelman, a Walker & Dunlop Company; and Justin Nelson, Senior Managing Director at Walker & Dunlop. Together, they outlined a market that continues to defy simple narratives. While conditions remain challenging in the near term, the discussion pointed to a clearer path forward defined by constrained supply, selective capital, and a recovery that is taking longer than many anticipated.

Demand remains, but it is harder to see

Multifamily demand has not disappeared. As discussed on the webcast, absorption remains positive, but it has not kept pace with elevated supply in certain markets. At the same time, renter behavior is evolving in ways that can obscure underlying strength.

Kris noted that retention rates have increased meaningfully, with more residents choosing to stay in place rather than move. This reduces leasing velocity even when demand is present. Ivy added that household formation has moderated, particularly among younger cohorts, with more individuals delaying moves or living at home longer.

Taken together, these dynamics suggest that demand remains intact, but it’s less visible in traditional metrics.

A fragmented housing landscape

The current environment is increasingly defined by divergence across geographies, asset classes, and renter profiles.

On the single-family side, Ivy emphasized that affordability remains a constraint for first-time buyers, while move-up buyers are showing greater sensitivity to broader economic uncertainty. Conditions vary significantly by region, with some Midwestern and Southeastern markets demonstrating relative resilience, while others face ongoing pressure.

In multifamily, performance is also uneven. Kris highlighted that assets targeting higher-income renters are seeing relatively stronger demand, supported by healthier rent-to-income ratios. In contrast, more workforce-oriented housing faces greater pressure, as affordability challenges weigh more heavily on those households.

For clients, this reinforces an important reality: outcomes today are increasingly determined at the micro-market and asset levels, rather than by broad national trends.

Supply constraints are shaping the next cycle

While demand has been uneven, supply trends are becoming more definitive and increasingly constructive for the medium term.

Multifamily construction starts have declined significantly from peak levels. As discussed on the webcast, development today faces a high bar, particularly given conservative underwriting assumptions and limited tolerance for forward rent growth projections.

This pullback in new supply is expected to play a critical role in the next phase of the cycle. The discussion pointed to 2026 as a likely inflection point for recovery, with stronger operating fundamentals potentially emerging in 2027 as deliveries are reduced and the market rebalances.

Capital is available, but disciplined

One of the more notable dynamics in today’s market is that capital availability is not the primary constraint. Discipline is.

Justin noted that debt capital remains accessible from agency lenders, banks, and private capital sources. However, execution remains highly selective, with lenders focused on fundamentals, structure, and risk-adjusted returns.

On the development side, equity remains the primary constraint. Market participants are requiring conservative assumptions and are reluctant to underwrite future rent growth, making it more difficult for projects to meet return thresholds.

For clients, this environment rewards preparation and precision. Capital is there, but it is going to the most compelling opportunities.

Policy and supply: unintended consequences to watch

The webcast also highlighted potential policy risks, particularly in the build-to-rent and single-family rental sectors.

Ivy raised concerns that proposed legislation could negatively impact valuations and reduce future development activity. As discussed, market participants are already evaluating how such policies could affect supply at a time when additional housing is needed.

The broader takeaway is clear: policies aimed at improving affordability must carefully consider their impact on housing supply.

Migration and mobility are evolving

Another key factor influencing demand is the shift in migration patterns following the pandemic.

Ivy noted that some markets that saw strong in-migration, particularly across the Sunbelt, are now experiencing more normalized or reduced inflows. At the same time, markets with limited new supply are benefiting from tighter conditions.

Mobility trends also continue to decline, with more renters choosing to remain in place. As discussed on the webcast, this has implications not only for multifamily leasing activity but also for future homeownership demand.

Looking ahead: opportunity in a more complex market

The housing market is at a crossroads, but not at a standstill.

The webcast discussion made clear that while near-term conditions remain uneven, the foundation for recovery is forming. Demand is present, supply is moderating, and capital remains engaged.

For Walker & Dunlop clients, the opportunity lies in navigating this complexity with clarity and discipline:

• Focus on markets with durable demand drivers
• Align capital strategies with evolving conditions
• Position assets for the next phase of the cycle

As the market moves in 2026 and beyond, those who act with conviction grounded in data and local insight will be best positioned to capitalize on the recovery ahead. For more expert commentary on what is moving markets today, watch the full webcast.