Economic Uncertainty and Fed Rate Cut Weigh on 3Q Outlook

The FOMC cut the federal funds rate by 25 basis points to 4%–4.25% and signaled another cut before year-end.
Despite strong 2Q growth, weak hiring and political instability slowed 3Q momentum.
National rent growth will likely stay below 2% through 3Q 2026, led by Miami at nearly 4%.
New multifamily supply will remain limited, with 323,000 units expected nationwide.

Key Takeaways

A Volatile Close To The Quarter

The third quarter ended under political strain as a federal government shutdown began. Analysts warn that a prolonged closure could slow growth through the end of 2025, per RealPage.

The second quarter delivered an unexpected boost. GDP rose 3.8% on an annualized basis, its strongest gain in two years, driven by solid consumer spending and fewer imports.

Labor Market Cools Amid Uncertainty

Growth remained steady, but hiring lagged. Employers added only 101,000 jobs in July and August, far below last year’s pace. Over the past year, job creation totaled under 1.5 million as companies faced tariffs and policy uncertainty.

Fed Shifts Policy as Inflation Moderates

Inflation stayed above target but showed little acceleration. The PCE Index rose 2.7% year-over-year in August, slightly higher than April’s low. The Fed responded with a 25-basis-point cut, citing weaker labor data and growing downside risks.

Modest Rent Growth, Slower Supply

We expect effective asking rents to grow less than 2% nationwide through 3Q 2026. Miami leads with nearly 4% annual growth, while Denver could see rents drop more than 3%.

Half of the largest markets should post gains between 2% and 2.9%. About 15% will see growth in the 1% to 1.9% range.

Developers plan to deliver roughly 323,000 new units over the next year. The top 50 metros will account for 88% of that total. Phoenix, New York–Newark, Dallas, and Los Angeles rank among the most active markets.

Looking Ahead

The combination of rate cuts, slower hiring, and weaker confidence points to a cautious 2026. While Miami and a few metros continue to outperform, national rent growth will likely stay modest as new construction cools and uncertainty lingers.