The Return of Rent Growth: Why the Multifamily Recovery Is Splitting by Class and Submarket

Over the past 90 days, national apartment rents grew by roughly 1.5%, the fastest rate since late 2022. For a sector that absorbed the largest supply wave most of us have seen in our careers, that is a meaningful turn. Well short of a boom, but the clearest sign yet that three years of oversupply is finally being worked through.

To evaluate where the sector stands at midyear 2026, I reviewed the latest second quarter actuals and third quarter forecasts on America’s Commercial Real Estate Show with Carl Whitaker, the Vice President and Chief Economist at RealPage.

The headline number is the least useful part of the story. As Carl put it, the national average means less today than at any point in his career. If you own apartments, two questions determine your outcome: which class of product you own, and which submarket it sits in.

The Turnaround: Not as Good as Hoped, Not as Bad as Feared

Demand was never the problem in the markets that took on the most construction. Nashville, Atlanta, Jacksonville, and Orlando all had the renters. What they lacked was breathing room. Two forces are now working together: supply is pulling back, and demand has held up better than a weak job market and weak consumer sentiment would predict.

One caution on that supply pullback. It may be shorter lived than expected. In Raleigh Durham, new market rate starts are already returning faster than forecast, most likely from projects permitted and financed before the pause. Nobody is going back to 2022 construction levels soon, but the appetite in some markets is returning quicker than the narrative suggests.

The Class Divide: Where the K-Shaped Economy Shows Up in Rents

Nearly all of the national turnaround came from Class A, which grew at roughly its pre-COVID pace over the past 90 days, on par with 2018 and 2019. Class B is finding its footing. Class C continues to lag, and in places it is deteriorating.

• Class A demand carried the supply: This product absorbed the bulk of the new deliveries and still posted growth. Demand did that, which is why Class A is the most defensible position in the sector today.
• Class B is the largest and least understood segment: Class B is roughly 50% to 60% of the tracked stock, so its average mirrors the national average by construction. Break it apart instead. B plus product largely tracks Class A, because those residents preserved more of their share of wallet through the inflation cycle. B minus product, typically 30 to 40 years old, performs meaningfully worse. The split runs inside Class B as much as between the letter grades.
• Class C faces a perfect storm: Immigration reform, household level hardship, and functional obsolescence are landing on the same product at once. In Raleigh, Class C rents have declined for roughly 15 consecutive quarters. When supply delivers, yesterday’s B renter moves into A and the A renter moves into the brand new product, but Class C has no back channel to pull replacement demand from. It will not turn until job growth strengthens.

Where You Own Now Matters More Than What You Own

Dispersion inside metros is as wide as dispersion between them. Atlanta is the example I know best, since we are headquartered here and run a sizable apartment group. Carl’s data shows Class A rents in Midtown, Buckhead, and Northeast Atlanta up 2% to 3% year over year, while the metro average reports rents down 1.5% to 2%. Both are correct. The average is dragged down by South DeKalb County and by far northern suburbs still absorbing oversupply, build to rent product included.

We see it at the property level constantly. You can find two complexes of similar vintage here where one runs 60% occupancy and the other sits at 99%. A county line can amount to a different set of rules to play by, with Fulton County submarkets facing headwinds that Cobb County is not. Underwriting off a metro average today means underwriting a property that does not exist.

Build to Rent Draws a Different Renter

RealPage reports build to rent as its own data set instead of folding it into conventional apartment metrics, and that is the right call, because it behaves like a different product. The demand is life stage driven: a couple in their late thirties with young children, wanting a better school district, grown out of a three bedroom apartment, and priced out of the for-sale market in a way they would not have been 15 years ago. The 26 year old on a second promotion is still in the urban core.

Uncertainty around what became the 21st Century ROAD to Housing Act, signed into law in July 2026, stopped several of our development clients in their tracks. Legislative uncertainty is one of the most effective ways to shut off a supply pipeline, and that pipeline will take time to rebuild now that the rules are clearer.

The Cost Side, and the AI Question

Expenses have improved, and that matters as much to 2026 returns as rent growth does.

• Inflation has narrowed to energy: About a third of the inflation basket is running hot today, concentrated in energy and its downstream inputs. In 2022 that figure was closer to 95%.
• Taxes and insurance are cooling: Still not cheap by 2021 standards, but the sticker shock of insuring a rapidly revalued asset is behaving more cooperatively. Owners still underwriting large annual increases should revisit that assumption.
• Marketing costs are the exception: They keep climbing, because competition for traffic is intense and concessions remain a live topic. Spend stays elevated until occupancy normalizes.

Artificial intelligence is showing up in the rent data through wages. Median rent to income sits at its lowest level since 2020, and Carl reads much of that as productivity gains and wage growth flowing to the office-based workers who fill Class A and B product. In underwriting, three analysts now cover roughly ten times the volume they once could, while still spending the same time on the 5% of deals that clear.

The Barbell Capital Market and the Road to 2027

Investment sales have taken a barbell shape. Class A, well located product still trades with relative gusto, including portfolio trades in the mid four cap range. At the other end, distressed forced sales are clearing: the 1970s vintage property at 60% occupancy facing large capital expenditures, often bought with an adjustable rate mortgage. Little happens in the middle, and the movement ahead comes from Class B, which now includes 2000s and early 2010s vintage.

Rates remain the open variable. What we hear from our clients is that they now treat today’s rates as roughly normal historic rates that are here to stay, and that is what has people comfortable transacting again. If further hikes arrive, the wider market may not absorb the pressure without occupancy giving ground. RealPage’s forecast puts the return to pre-COVID norms in 2027.

Final Thoughts: Own the Right Letter in the Right Submarket

The fundamentals underneath this sector are sound. What changed is that the average no longer tells you anything you can act on. Class A demand is strong enough that moveouts to single family, historically a headwind, have become much less significant, and Carl reads that as a structural change rather than a cyclical one. Class B is improving. Class C needs job growth.

The opportunity I would point investors toward is the second tier of the Southeast, where long term job growth is trending. Greenville Spartanburg was on nobody’s radar two decades ago and now attracts large international corporate investment, with the same case building in western North Carolina and Chattanooga. We did not plan this on the show, but I have an unusual Class A project coming to market in Spartanburg shortly. The capital follows the jobs.

Optimize Your Multifamily Positioning

Every market cycle creates challenges and opportunities. Business owners who plan early, investors who stay disciplined, lenders who lean in thoughtfully, and agents who continuously improve will be best positioned to succeed in 2026 and beyond. If you’d like to discuss any of these strategies in more detail, feel free to reach out.

Whether you are repositioning a Class C asset that has stopped performing, underwriting a Class A acquisition in a Sunbelt growth market, or deciding whether to hold a stabilized Class B property through 2027, Bull Realty provides the specialized market intelligence needed to execute clean transactions. Contact our Multifamily Advisory team today for a clear-eyed valuation and a strategy built on submarket level data rather than metro averages.

Michael Bull, CCIM
Michael@BullRealty.com
404-876-1640 x 101
https://www.bullrealty.com