Stuart offers insights into multifamily trends, challenges and opportunities. 

Multifamily fundamentals stay stable

“Broadly, fundamentals are stable. There’s ample capital for multifamily financing available and that follows strong signs of pent-up demand for that financing. At the same time, there’s this element of caution around potential recessions, legislative risks and inflation potential,” Stuart said.

While completions still outnumber absorption, asking rents and vacancies remain steady. The multifamily vacancy rate was 6.8% in Q2 2026, up from 6.6% in Q2 2025, according to Moody’s data. Class B and C properties had notably lower rates at 5.2% in Q2 2025 and 5.4% in Q2 2026.”

“The expectation is that vacancies will firm up, given the lack of new supply that will be introduced over the next 18 months and the material drop in new starts,” Stuart said. That’s in part driven by tariffs, inflation and the Iran conflict—especially their impact on labor, material and transportation costs.

“California markets tend to be tighter from a fundamentals standpoint,” Stuart said. In San Francisco, for example, Q1 average rents are nearing all-time highs and construction activity remains below the market’s five-year average, according to Moody’s data.  

Multifamily construction—mostly class A properties—hit record highs in recent years, softening rent growth, increasing national vacancies and overwhelming many markets. While the areas most impacted are in the Sunbelt, they’re not the only ones affected by oversupply.

“There are markets that are more challenging, such as Denver, where a material amount of new supply has been introduced,” Stuart said. Likewise, new class A apartments in Washington, D.C., are offering up to four months of renter concessions. 

“There are geographies where market participants are watching other aspects that affect their business. Seattle is an example where owners and operators are watching local legislative proposals and how they will affect their portfolios,” Stuart said.

The state of Washington recently enacted a rent stabilization and housing stability law that caps annual rent increases, prevents mid-tenancy rent hikes during the first 12 months, strictly regulates fees and deposits, and mandates the state to enforce tenant protection.

Similarly, rent control initiatives have played a central role in recent elections across major markets, including Boston and Seattle.

New York is one market to watch. “You have a lot of financing demand and relatively good fundamentals,” Stuart said, “with the caveat that operators are paying very close attention to local legislation around rent freezes, caps and other changes.”

Challenges for multifamily

Multifamily challenges can be summed up in one word: uncertainty. Inflation, interest rates and geopolitical conflicts are constantly in flux.

“Rising interest rates and inflation have cut new construction down considerably,” Stuart said. Increased prices could exacerbate issues investors already face, including:

• Potential labor shortages stemming from immigration policies 
• More expensive materials due to higher tariffs
• Higher borrowing costs because of interest rates
• Rising insurance costs fueled by higher replacement costs

Material, labor, insurance and maintenance costs usually increase with inflation, adding to already rising multifamily expenses. Higher materials and construction expenses may also increase existing apartments’ replacement cost value.

Legislative risks also persist in many markets, driven by limited housing supply. “Many municipal budgets are imbalanced. Many of them need more revenue, and property taxes are a primary source of that revenue,” Stuart said. “There’s some trepidation on the minds of our clients as a result.”

Opportunities in multifamily

Multifamily investors with a long-range view of markets are well-positioned for success.

For example, for-sale housing affordability issues continue to fuel long-term renter demand, making multifamily a defensive, inflation-resistant asset class.

“We’re at a place in the cycle where values are the softest they’ve been in several years, and many people view that as an opportunity,” Stuart said. “It’s a great time to acquire for long-term local operators who understand the ebbs and flows of legislative risk, interest rate risk and the inflationary risks.”

Chase is here to help clients as they navigate these complex issues through each stage of the real estate and economic cycle. “We have excellent depth of information and data. At a national and local level, we can help investors understand what trends we’re seeing happen with property taxes and utility, rent and material costs,” Stuart said.

The bottom line: Despite uncertainty around inflation, government policies and geopolitical tensions, multifamily remains a strong long-term bet. However, real estate is a local game, so it’s important that investors consider the dynamics of their local markets.