MHN Asks: When Will Multifamily’s Rebound Show in the Numbers?

For multifamily owners and investors, 2026 may mark a turning point. But whether improving sentiment translates into real momentum remains an open question. As new supply begins to ease and capital shows signs of returning, the conditions for a stronger year are taking shape.

In this interview with Multi-Housing News, Hamilton Zanze CEO Kurt Houtkooper discusses what still needs to align for a sustained recovery. He weighs in on occupancy, deal flow and lender activity, and shares how his firm is approaching pricing and underwriting in an environment where visibility is improving, but far from certain.

What specific signals need to materialize for you to feel confident the cycle has truly turned?

Houtkooper: Higher occupancy levels and more investment sale transactions.

At the start of this year, the occupancy level across our portfolio was 92%. By the midsummer height of the leasing season, it should be close to 94%. Then we believe we’ll settle into just over 93% at the end of December. That would be a meaningful signal to us that we are returning to a period of leasing equilibrium.

Looking at the industry more broadly, slightly higher occupancy levels combined with fairly flat expenses will drive moderate increases in NOI, which in turn will have a positive impact on property valuations.

Capital markets are the other side of property valuations, and we think more property sales and refinances will take place in 2026 than in 2025. We’re currently seeing brokers doing a lot of opinions of value, and that will lead to more properties coming to the market in the second quarter for sale, which, in turn, means more sales should occur in the second half of the year.

What changes in lender behavior are actually altering deal math in 2026, and which shifts are more cosmetic than structural?

Houtkooper: The shifts we see now are profound, meaningful and structural. They’re certainly anything but cosmetic.

Numerous options are available for borrowers. When you have an abundance of debt capital available, spreads are going to decrease, and all-in borrowing rates will decline (assuming SOFR and treasury rates don’t increase) because of the competition that’s created between lenders.

We work a lot with Fannie Mae and Freddie Mac, and each of those GSEs saw their multifamily loan purchase caps increase to $88 billion in 2026. In addition, CMBS is healthy, active and lending to multifamily, while insurance companies are very active in the apartment space.

Debt funds have more capital to deploy than they’ve ever had, big banks are back and regional banks are starting to come back. So when you have all of these lenders open for business, that makes things better for borrowers: lower interest rates, higher loan-to-value ratios and better covenants.

We’re also seeing that lenders are no longer kicking the can down the road when it comes to distressed loans. Mark-to-market adjustments have actually happened, and lenders are aware of the value of real estate. As a buyer, we’re seeing more opportunities to buy from banks, more short sales and more note sales because lenders are clearing their books.

Pricing resets have been underway for some time. Where do you still see disconnects between buyer expectations and seller expectations, and what will close that gap?

Houtkooper: I would say it’s still a buyer’s market. When you really look at a purchase and sale negotiation, more terms are in the PSA that are buyer-biased than seller-biased. And as a seller, you’ve got to be really careful about who you pick as the buyer. A lot of buyers out there aren’t qualified. They don’t have their equity lined up yet, so a lot of transactions are falling out of contract.

We’re anticipating more equity coming to the market now that the debt markets have opened. One of the consequences of the banks being back is that we’re starting to see exchange capital come back, which is a good development on the equity side. Exchange capital is heavily dependent upon bank lending.

The return of equity and banks’ need to deploy capital into real estate will spur more transactions, which in turn will close the gap between buyer and seller expectations.

From an underwriting perspective, what assumptions are you most conservative about, and which variables have become more predictable compared to last year?

Houtkooper: Exit cap rates are certainly more predictable. People feel better about the trajectory of borrowing rates. If you look at the forward curve, borrowing rates are going down. And there’s a belief in the marketplace that there are going to be more transactions over the next three years and that there’s going to be plenty of available equity and debt. That’s provided less volatility as to what exit cap rates should look like. That’s really important.

We also believe we have good control over our expenses. We don’t see volatility on the expense side going forward. Across the industry, for 2026 we’re conservative about rent growth, the fading of concessions and the burn-off of loss-to-lease. In the markets we’ve recently bought into, like San Francisco, Reno, and Kansas City, we’re more bullish on rent growth and the decrease of loss to lease.

Expense pressure, particularly insurance, has weighed on performance across the sector. How are you pricing in structural expense risk vs. temporary volatility?

Houtkooper: We don’t see temporary volatility going forward, and we feel that we have a good handle on our expense growth in 2026.

We anticipate that our insurance costs will go down. We are not building into our pro formas a decrease in insurance, but we do expect it to go down. We’re not anticipating a rise in labor costs. We have a really good feel for what repair maintenance is going to be, and we’re appealing some property tax assessments, which we believe will be successful.

Basically, we anticipate our expenses growing at 3% per year, and we don’t foresee any disruptions from temporary volatility.

Many investors are currently debating timing. What gives you conviction to act on a deal today rather than wait for additional clarity later in the year?

Houtkooper: Now is a great time to deploy capital if you’re a qualified buyer and well-known operator. Sellers are trying to pick the best buyers, and they’re giving a premium discount to them.

If you are well-capitalized, you can get positive leverage. We’re buying at cap rates that are wider than our borrow rates. We think the fundamentals of apartments are going to be really strong in 2027 and 2028 as demand begins to outweigh supply, and so we want to deploy now while we still have positive leverage.

As new deliveries begin to taper, how are you distinguishing between markets that are genuinely stabilizing and those that are simply pausing before another leg of absorption?

Houtkooper: At Hamilton Zanze, our focus is on research, and our acquisition-tiering system heavily weighs on markets that aren’t battling oversupply. In 2024 and 2025, we had a significant deployment of investment capital into markets like San Francisco, Kansas City and Reno – metros that had limited new deliveries and are situated for strong rent growth.

We will continue to target those types of markets and will steer clear of areas where we believe there’s an oversupply story – unless we feel the basis and stabilized cap rate and discount-to-replacement cost are extremely attractive in markets we feel will easily absorb the current oversupply.

Looking at the broader industry, what’s one risk to the 2026 recovery narrative that you think is underappreciated—and one area where you believe the market may be overly cautious?

Houtkooper: I think there’s an aspect of AI that’s underappreciated and another about which the market may be overly cautious. As to the former, AI in tech markets like San Francisco is creating jobs, which helps apartment demand. Our portfolio of apartments in the city over 18 months has gone from mid-80s occupancy to high 90s occupancy. There is a massive in-migration of tech workers, and I do believe the “doom loop” narrative made capital overly cautious about investing in San Francisco over the last two years.

This article was originally published in Multi-Housing News.