The skyline tells a story. Cranes that once dotted city centers slowed their dance in 2025, signaling a shift in the multifamily housing mar-ket. After years of record-break-ing starts and completions, the sector is recalibrating to more sustainable levels. “Multifamily development showed stronger momentum, benefiting from low for-sale inventory and solid rental demand, as buyers were priced out of the single-family market by elevated home prices and mortgage rates,” said Fan-Yu Kuo, senior economist, National Association of Home Builders (NAHB). “This strength was more pronounced in smaller cities and lower-density areas.”
The slowdown in the multi-family market, which is approximately 95% for rent, is reflected by modest housing starts performance. The seasonally adjusted rate for buildings with five units or more in September of 2025 (the most recent information available due to the protracted government shutdown) dropped 11% over the prior month and dipped 8.6% from the same month a year earlier, according to the U.S. Department of Hous-ing and Urban Development and the Census Bureau. However, the latest housing data appears to contradict other economic indicators.
“The multifamily market has remained more resilient,” Derrell Jackson, workplace segment director for Tarkett Commercial, stated. “While multifamily starts have dropped since their peak in 2021, we’ve continued to see strong renter demand, which helps investor returns remain high.”
Further proof, to a certain extent, can be gleamed from other sources. For example, townhouse construction continued to gain market share as growing numbers of homebuy-ers look for more walkable and medium-density residential neighborhoods, NAHB reports. Confidence in new multifamily housing increased year-over-year in the third quarter, according to NAHB’s Multifamily Market Survey (MMS).
The survey, which measures builder and developer sentiment about current production conditions in the apartment and condo market, revealed optimism among developers of low-rise market-rate and subsidized rental properties. “We are seeing a degree of bifurcation in the multifamily market,” Debra Guerrero, SVP of strategic part-nerships and government affairs at The NRP Group (San Antonio) and chairperson of NAHB’s Multifamily Council, stated in a release. “Developers of low-rise properties express increased optimism while developers of mid- and high-rise properties and condominiums remain less confident.”
While confidence levels are rising, the challenges remain formidable. Increasing construc-tion costs, regulatory hurdles and financing difficulties con-tinue to weigh on the sector. “In 2025, the return to histor-ical norms did occur and drop in starts and completions did happen,” noted Steve Kuhel, FEI Group’s director—Multifamily Solutions. “But again, they were coming off historical highs.”
Shifting paradigms
As builders prospect for 2026, the multifamily market sits at a crossroads shaped by demo-graphics, economics and cultural shifts. For example, lease renewal rates reached historic highs in 2025 driven by afford-ability concerns and limited housing alternatives. “Apart-ment renovations were also re-tracted as owners and managers shifted their focus to managing operational costs rather than chasing higher rents through renovations,” said Matt Walker, vice president of multifamily, Shaw Industries.
Oversupply continues to impact the market. CBRE report-ed the multifamily vacancy rate rose to 4.4% in the third quarter of 2025 as new deliveries out-paced net absorption for the first time in six quarters. “Apartment market trends indicate a steep decline due to oversupply and rising vacancies,” Walker said.
Housing preferences are also being influenced by different generations. “Vacancy rates stand to be impacted by more Millennials and Gen-Zers mov-ing from their nests,” said Sar-ah Martin, associate director of forecasting at Dodge Construc-tion Network. “That makes the multifamily market a prime target for developers and inves-tors.”
FEI Group’s Kuhel added, “The continued rising average age of a first-time homeowner—now 40 years old—suggests big-ger units may grow in demand as people stay put longer. But younger generations may not put the same premium on owning a home as past generations.”
This paradigm shift could reshape both the single- and multifamily markets. NAHB’s Home Building Geography In-dex reports that affordability conditions in the single-family market remain at crisis levels, which boosts the need for new multifamily construction. “The extended lack of affordability will change behaviors as well, just like the housing crisis in 2008 and the pandemic changed behaviors,” Kuhel stated.
Overall, the outlook is mixed. Inflation and job reports remain key indicators, with tariffs and the aforementioned federal gov-ernment shutdown complicating monetary policy. “The Fed re-sumed rate cutting in September to manage risks from weakening labor market conditions,” Rob-ert Dietz, NAHB’s senior vice president and chief economist, observed. “But the shutdown canceled October job and infla-tion reports, complicating policy decisions heading into 2026.”
Despite these uncertainties, the overall economy remains in good shape, according to published reports. As NAHB’s Dietz stated: “With stimulative fiscal policy and accommodative monetary policy supporting business investment and consumer spending, combined with greater clarity on trade policy, the economy is expected to continue expanding in 2026.”
Mitigating factors
The multifamily sector, which includes everything from apartments and condos to senior living spaces, student housing and factory-built homes, continues to be a mixed bag. With housing representing an estimated one-third of residential flooring sales, the sector’s trajectory in 2026 will directly influence product demand, design trends and material choices.
“Multifamily new construction has to pick up because we’re in a housing shortage situation and people need a place to live,” said Jennifer Zimmerman, AHF Products’ chief commercial officer.
Similar to the single-family market, unit sizes are trending smaller with residents prioritizing shared amenity spaces over large, private footprints. “For flooring, this leads to a greater demand for premium, highly durable resilient surfaces that meet the performance needs of different shared spaces,” Tarkett Commercial’s Jackson said. “Rubber sports flooring in gyms and commercial-grade LVT in lobbies and lounges are prime examples.”
Builders’ cost concerns are reshaping flooring choices as well. Hard surfaces remain the preferred option in new construction, but federal tariff policies and limited domestic supply are reportedly influencing purchasing decisions. “Rising costs through tariffs and lack of domestic options may cause designers to reconsider soft-surface products,” FEI Group’s Kuhel speculated. “Soft surfaces are the last predominantly domestic products produced, something that should be watched as tariff policies evolve.”
Sustainability is emerging as a differentiator as well. “Both builders and investors are asking for supply transparency, recycled content and circularity,” Jackson observed. “Flooring manufacturers that can share a consistent commitment to sustainability and provide clear, easy-to-access documentation will be preferred.”
Labor shortage remains a major issue with builders struggling to find skilled workers amid tighter immigration policies. “This shortage has driven up wages for skilled workers, further increasing construction costs,” NAHB’s Kuo observed.
Looking ahead, the interplay between multifamily builders and flooring suppliers is expected to intensify. As they grapple with cost pressures and shifting consumer preferences, they may consider aligning their go-to-market strategies to meet evolving demands. “Multifamily builders are looking for more reliable suppliers,” AHF Products’ Zimmerman pointed out. “One of the biggest things we’ve seen is a shift to domestic suppliers.”
