Why multifamily’s next chapter will be a market-by-market story

The housing market rarely gives us one clean signal.

Interest rates matter. So do demographics, household formation trends, affordability, job growth, new supply, and the existing inventory of homes and apartments. The challenge for market participants is understanding how those forces interact and recognizing that their impact can vary significantly from one market to another.

That was one of my biggest takeaways from the recent Walker Webcast conversation with Ivy Zelman, EVP and Co-Founder of Zelman, a Walker & Dunlop company.

Ivy challenged one of the most common assumptions in housing today: that the United States is facing a broad, structural housing shortage. Her research points instead to a more balanced national market, with meaningful differences by property type and geography.

Those of us focused on multifamily are moving into an environment where broad narratives may be less useful than detailed market- and asset-level analysis.

Here are five lessons I took away from the conversation.

1. Demographics should be part of every long-term investment thesis

Real estate investors have always paid close attention to population and household growth. But Ivy’s analysis reminds us to look beyond recent migration patterns and consider the longer-term demographic trajectory.

Population growth ultimately depends on births, deaths, and immigration. At the same time, household formation depends on more than population alone. The age at which people form independent households, affordability, employment, lifestyle preferences, and living arrangements can all affect housing demand.

One particularly important variable is how many young adults live at home. Ivy explained that every 100-basis-point change in the share of 20- to 39-year-olds living at home can represent an annualized change of roughly 500,000 households, according to Zelman research.

That is a meaningful swing in potential housing demand. The lesson is not to assume yesterday’s household formation trends will continue indefinitely. Demographics move slowly, but their cumulative effect can reshape demand over an investment horizon.

2. Multifamily has an affordability advantage

One of the clearest positives in the discussion was multifamily’s position relative to homeownership.

Higher mortgage rates and home prices have made buying difficult for many households. Ivy estimated that the all-in monthly cost difference between renting an apartment and owning a starter home is approximately $900 when mortgage payments, property taxes, insurance, mortgage insurance, and homeowners association costs are considered.

Households still need housing even when buying becomes less attainable. As a result, renter households are accelerating, while owner households are decelerating.

For multifamily owners and investors, that creates a compelling underlying demand story. The relative affordability of renting deserves a central place in evaluating future demand.

3. Supply matters more than the national narrative

Ivy described multifamily as currently oversupplied nationally, with vacancy at 8.3 percent according to Zelman research. But that headline number masks substantial differences among individual markets.

Some areas are still working through elevated levels of new supply and lease-up competition. Others have had limited construction and are already experiencing stronger rent performance.

That disparity creates a very different investment environment from the one many investors experienced during the decade before the recent cycle turned.

For a long period, strong national fundamentals could lift a wide range of multifamily assets. Today, investors need to be much more selective, focusing on questions such as:

• How much new supply remains to be delivered?
• How quickly is existing inventory being absorbed?
• Are concessions stabilizing or declining?
• What does the future construction pipeline look like?
• Is employment growth translating into household demand?
• How does the cost of renting compare with owning locally?

No single metric provides the answer. The opportunity comes from considering the full picture that those signals present.

4. Rent growth may recover gradually and unevenly

Investors have been waiting for greater clarity on rent growth, and Ivy offered a framework for what that recovery could look like.

Zelman research currently forecasts national multifamily rent growth of approximately 1.5 percent in 2026, increasing to 2.6 percent in 2027, and reaching 3.7 percent in 2028. Those forecasts remain subject to economic conditions, including interest rates and inflation.

The important takeaway is the potential divergence underneath the national forecast. Some markets may recover earlier because their supply pipelines have contracted substantially. Others may need several more years to absorb excess inventory. Investors underwriting acquisitions today need to understand exactly what they are assuming about rent growth and what evidence supports that assumption.

The same applies on the disposition side. As buyers gain greater confidence in future rents, the underwriting equation can change quickly. Properties that have struggled to attract bids in an uncertain environment may look different when investors have greater conviction around future net operating income.

Forward-looking market intelligence is particularly valuable in this environment.

5. Existing assets could become increasingly important

If long-term household growth moderates, developers and investors cannot assume that continuously adding new supply will always be the best path to growth. Ivy suggested that multifamily owners may find opportunity in acquiring, renovating, and repositioning existing properties rather than relying exclusively on new construction.

Existing multifamily assets offer investors another way to respond to changing demographics and supply conditions. In markets where development economics remain challenging, or future supply needs appear limited, value-add strategies may provide an alternative path to creating value.

The key is selectivity. Investors need to understand the physical asset, the competitive set, local renter demand, the supply pipeline, financing conditions, and the realistic potential for improving operations or the resident experience.

The next cycle will require greater precision

Multifamily investors should resist overly simple narratives. The United States can have a relatively balanced housing market overall, while individual cities, neighborhoods, and property types experience very different supply-demand conditions. Multifamily can face elevated vacancy today while still benefiting from favorable renter economics and improving conditions as the construction pipeline moderates.

Those realities can coexist. For market participants, the next phase of multifamily will reward precision: understanding the local supply pipeline, following demographic and employment trends, pressure-testing rent assumptions, and evaluating each asset within its specific competitive environment.

Walker & Dunlop has the benefit of seeing these dynamics from multiple perspectives, combining market research with the conversations our advisors have every day with owners, investors, and capital providers.

In a market this nuanced, that perspective is invaluable to our clients. The opportunity is to understand where, when, and for which assets the fundamentals are beginning to shift.

Watch the full Walker Webcast episode with Ivy to learn more.