Kurt Houtkooper Shares His 2026 Market Outlook With Wealth Management

2025 brought an evolving landscape and marked a year of meaningful progress for the multifamily industry.

Operating fundamentals in many markets continued to feel the headwinds from the recent surge in new construction, and, as a result, rent growth softened. Interest rates remained relatively high after a less-than-expected easing of monetary policy. However, we saw the reemergence of major banks in the lending market, signaling renewed confidence and the start of a more active investment environment.

For investors searching for alternative investments that can deliver targeted returns and work within a diversified portfolio to help create generational wealth, multifamily remains a resilient asset class worthy of strong consideration.

2025 in Review

While 2025 brought its share of challenges, it also revealed clear signs of progress that point to a stronger future for multifamily.

According to Apartments.com, the national average rent for a one-bedroom apartment was $1,631 per month in October, an increase of 0.7% from one year earlier. The national vacancy rate stood at 8.3%.

For several years, a surge in apartment construction slowed absorption of new units, pushed vacancy rates higher and flattened rent growth. Those effects are now beginning to fade. Development pipelines have contracted sharply as tighter underwriting standards and rising construction costs make new projects more challenging.

Cushman & Wakefield reports that approximately 450,000 units were under construction during the third quarter, the lowest quarterly total in a decade, with further declines projected. Overall, the multifamily construction pipeline has decreased by more than 50% from its recent peak, signaling a shift toward healthier supply-demand dynamics.

Meanwhile, apartment investment sales have shown signs of rebounding. Large banks have rebuilt their balance sheets and returned to lending, which has brought 1031 exchange investors back into the market and fueled transaction activity.

Sales volume increased by 5.3% during the first half of the year compared to the same period in 2024, according to Newmark. In the third quarter, sales volume reached $43.8 billion, a 13% increase from one year earlier, according to MSCI Real Capital Analytics. From our vantage point, we are also seeing more distressed properties come to market, creating opportunities for well-capitalized investors.

A Strong Future

Looking ahead, we expect the slowdown in new construction to positively impact operating fundamentals in the latter half of 2026, when vacancy rates should begin to decline and rents start to grow. By 2027 and 2028, we anticipate meaningful rent appreciation.

At the same time, investment sales should continue to accelerate in 2026. While there is not an abundance of capital, more capital is available than in the past few years. Along with the larger banks, both private credit and insurance companies have emerged as sources of debt. Not coincidentally, institutional funds are starting to deploy equity again, as there has been a reset in pricing and confidence around the cost of capital has returned in the space.

As rent rolls and operating fundamentals strengthen and capital returns to the market, cap rates should compress and property valuations will increase, boosting investors’ returns.

As we prepare to enter 2026, investors and their advisors should understand that multifamily’s long-term outlook remains optimistic. By investing in institutional-quality apartment communities with the right sponsor, investors can experience consistent income, tax advantages, portfolio diversification and capital appreciation—while laying the foundation for generational wealth.

Kurt Houtkooper is the CEO of Hamilton Zanze.

This article was originally published in Wealth Management.