Multifamily Bid-Ask Gap Hinges on Rent Growth Outlook

Apartment buyers and sellers may not need a major drop in rates to reconnect, but the multifamily bid-ask spread won’t close until buyers can credibly underwrite rent growth, according to a Walker Webcast discussion covered by GlobeSt. Walker & Dunlop CEO Willy Walker and Ivy Zelman, co-founder of Zelman, a Walker & Dunlop company, said many buyers are still pricing deals on negative fundamentals.

Buyers Are Underwriting the Downside

With debt expensive and cap rates moving higher, many buyers assume flat or falling rents. They also expect higher concessions and continued lease-up competition. Under those assumptions, buyers have little room to stretch on price.

The result is a familiar stalemate. Properties can sit on the market even when plenty of capital seeks selective multifamily exposure.

Sellers, meanwhile, often anchor to values from the low-rate, high-growth era. Walker said the calculus changes quickly once buyers can project rent growth in their pro formas.

The Details

Zelman forecast U.S. multifamily rent growth of about 1.5% in 2026. She expects growth to reach 2.6% in 2027 and 3.7% in 2028. However, she cautioned that higher rates and sticky inflation could hurt the outlook.

She described multifamily as oversupplied nationwide. She cited an 8.3% vacancy rate. Still, faster renter household growth and better affordability support demand. Rent-to-income ratios also remain near trend.

Completions and starts have declined. Operators also report less lease-up competition and fewer changes in concessions. Still, July data showed a larger-than-usual slowdown in occupancy and rents.

The forecast does not signal a return to pandemic-era rent spikes. It would, however, mark a shift away from heavy supply pressure. The market could then offer a more workable operating backdrop.

Multifamily Recovery Will Be Market by Market

Zelman pointed to San Francisco as an outperformer. Years of limited starts there coincided with double-digit rent gains. She also highlighted supply-constrained Midwest markets.

By contrast, Austin and other heavily supplied Sun Belt markets may need three to five more years to absorb excess supply. Rents may not reaccelerate meaningfully until then.

Broader deal appetite is already picking up. CRE bidding activity posted its strongest growth in a year, according to JLL.

Why It Matters

For apartment investors, small changes in rent assumptions can have a large effect on value. The impact grows when costly debt limits leverage-driven returns.

Zelman said underwriters see cap rates moving the wrong way because of higher rates. Stabilization would remove a major source of uncertainty.

Costlier debt and rising cap rates create a double burden for buyers. As a result, even a modestly better revenue outlook could shift the balance of power.

Multifamily may also have a more resilient demand base than for-sale housing. Ownership affordability remains strained, which could support rental demand.

Other recent readings remain mixed. National rent dipped 0.1% in September even as vacancy fell.

What’s Next

Zelman said substantial pent-up demand in the transaction market could emerge once long-term rates improve. The same could happen if confidence in rent growth returns.

The first wave will likely come market by market. Assets with better occupancy, less lease-up competition and thin pipelines could draw stronger bids first.

Sellers may still need to accept values shaped by pricier capital. The gap between stronger properties and weaker assets could also widen.

In markets where owners still need concessions to compete with new deliveries, underwriting will likely stay conservative.