Rents: the recovery is real, even if Q4 looks seasonal
Year-to-date rent growth is 2.8% through August, according to RealPage. That’s the best pace in four years. Rents typically ease a bit from September through December, and Parsons expects the year to close around 2%.
So don’t read too much into soft Q4 monthly numbers. Parsons notes that rents appear to have bottomed in March, and nearly every major market now shows stronger year-over-year growth than it did then. CoStar has raised its 2026 rent growth forecast from 0.5% to 1.9% over the summer. In Q4, the year-over-year trend is the one to watch.
Occupancy is moving the right way
After more than three years of supply outrunning demand, the balance has shifted. CoStar reported the first year-over-year vacancy improvement in 17 quarters. Since March, occupancy is up 20 basis points per Apartment List and 50 per RealPage. Demand has held up better than most forecasters expected, with RealPage reporting more than 187,000 units absorbed in the second quarter alone.
Parsons points to two drivers: completions are down, and renter household formation has stayed stronger than the job market alone would suggest.
The Sun Belt is turning
Austin, Denver, Phoenix, Tampa and other markets working through the biggest supply wave since the 1970s are still posting negative rent growth, but the declines are shrinking fast. Per RealPage data cited by Parsons, Austin has swung nearly 650 basis points since March. Its rents are down about 1% year over year, the smallest decline in more than three years.
There are early signs of where things are headed. Smaller markets hit hard by supply, including Boise, Reno, Charleston and Wilmington, are already back among the top rent-growth markets, and Parsons sees them as a possible leading indicator for the larger metros. Meanwhile, lower-supply markets like San Francisco, San Jose, Oakland and Milwaukee are leading the country, each above 5% through August per RealPage. San Antonio and Denver remain the deepest rent-cutting markets, according to CoStar.
Concessions are easing, on their own timeline
RealPage reports concessions have come down from 15-year highs. Parsons expects them to linger longer than operators would like, even as vacancy improves, so Q4 leasing will still involve plenty of negotiation in many markets.
Capital: the money is there, and deals are queuing up
Multifamily loan originations hit $191 billion in the first half, the second-highest pace on record, though most of it is refinancing. Sales volume is up 4.1% year over year through July at $86.5 billion, still more than 56% below the 2022 peak. Cap rates have edged up from 5.5% to 5.7%.
Buyer sentiment is high, and buyers are being selective about which assets they want. A growing transaction backlog, along with fatigue between operators and their capital partners, could shake some deals loose. A flood before year-end isn’t likely, but pressure is building beneath the surface.
Higher rates: a modest help, not the main story
The Fed has raised rates for the first time in three years, and mortgage rates are near 7%. The common narrative is that this keeps renters in place and drives rents higher. Parsons pushes back on that. Renters staying longer does support renewals and occupancy, but weak home sales also slow household formation and new-lease demand. His view is that supply, not mortgage rates, has been the dominant force on rents, and supply is now falling. Higher rates help at the margins, but they aren’t what’s driving this recovery.
What to keep an eye on
Parsons is clear that the upside case depends on the economy holding up. He points to job growth, young adults finding work, inflation and consumer confidence as the variables to watch. Affordability is also increasingly K-shaped: renters earning over $50,000 spend about 21.5% of income on rent, while nearly a third of renter households can’t afford any unsubsidized rent at all.
Looking further out, starts remain compressed, though developers are beginning to underwrite projects for delivery three to four years out. Affordable housing construction has fallen to five-year lows as entitlement delays, zoning limits and rising costs outpace public funding, which underscores how much demand there is for new affordable supply.
The bottom line
For Q4, expect seasonal softness in the headline numbers, continued occupancy gains, and more Sun Belt markets moving toward positive rent growth. Concessions and cautious capital will keep it from feeling like a boom. But the biggest headwind of the past four years, supply, is going away, and Parsons’ case is that unless the economy slows materially, the underlying trend is better than the mood around it suggests.
What it means for talent: As fundamentals firm up and capital finds its footing, owners and operators are positioning for the next phase, and that starts with having the right people in the right seats.
Sources: This article draws on recent market analysis from rental housing economist Jay Parsons, along with data reported by RealPage and CoStar. It is intended for general market commentary purposes only and should not be construed as investment, legal, or financial advice.
This article first appeared in TALENT + STRATEGY Real Estate, the newsletter written by Katlyn Turley, President of H Two National.
If you are planning a senior real estate hire and want to talk it through, start a conversation with our team.