Apartment owners who have spent two years working through a wave of new supply may see relief sooner than expected. CoStar Group now projects national multifamily rent growth of 2.6% by the fourth quarter of 2027. That’s up from its earlier forecast of 1.9%.

Renters are filling the units built in 2024 and 2025 faster than expected and fewer new projects are being completed.

The near-term outlook improved too. CoStar’s Apartments.com expects annual rent growth to hold at 1.4% through the fourth quarter of 2026. That’s 50 basis points above its previous year-end forecast. The company calls the revision “modestly upgraded.” Even so, for an industry dealing with weak rent gains and high vacancy, it offers some financial oxygen.

“The higher rent growth outlook reflects the substantial progress made this year in absorbing excess inventory accumulated during 2024 and 2025,” Grant Montgomery, national director of multifamily analytics at CoStar Group, said in prepared remarks.

“Demand has exceeded expectations while the number of new project deliveries has continued to decline, reducing vacancy faster than anticipated.”

National multifamily vacancy is around 7.9%. CoStar expects stabilized vacancy to stay at about that level through 2026. After that, it should start to fall as the market keeps absorbing recent inventory, reaching 7.5% by the end of 2027.

The Supply Pipeline Keeps Shrinking

The drop in new construction is a big part of the story. CoStar expects apartment deliveries to fall 18% by the end of 2026 to 434,000 units. It projects another 19% decline in 2027, to 351,540 units.

Demand is also expected to cool. CoStar projects absorption will slow to 70,000 units per quarter by 2029, which is below the pre-pandemic five-year average. Deliveries are falling faster, though, so demand should still outpace new supply through 2028.

Jobs Are the Biggest Risk

Montgomery said the risks to the forecast look balanced. Renter demand has held up, but it depends on the labor market staying “broadly stable.”

That’s the main question for the outlook. Renter demand has stayed strong even as job growth has slowed. Whether that lasts depends on the broader economy.

Ongoing inflation, tariffs and higher energy prices could lead businesses to cut back. If that turns slow hiring into larger job losses, renter incomes would fall. Renters could then move to cheaper units, take on roommates or put off forming new households. Each of those would cut into demand.

A Slower Market After 2027

CoStar’s longer-range view is more cautious. The report calls the outlook “more restrained beyond 2027,” because slower population and labor-force growth will weigh on demand.

As a result, the forecast shows the strongest gains in 2026 and 2027. In that window, vacancy declines, rent growth speeds up to 2.6% and new supply keeps shrinking. After that, demographics start to limit how much more demand the market can count on.