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Welcome, welcome. It's the Rent Roll your podcast on all things rental housing, apartments, single family rentals, and Build to Rent. It's episode number 92 and we're back in the studio this week after being out on vacation last week, had a chance to finally take the family to the place that everyone calls the birthplace of new urbanism. That is Seaside, Florida. Absolutely beautiful, beautiful spot. If you've not been there, I'll tell you the one of the best things about it is we did not have to get in the once. Once we arrived until the time we left, we were able to walk and bike everywhere. Beach shops, dining, pools. That part was great. But I will tell you, I did read that Seaside's founders envisioned Seaside to be both affordable and car free. And I will tell you they did a lot right, but they failed miserably on those two fronts. It's not cheap and there are cars that you're dodging absolutely everywhere. Now, like I said, we didn't have to drive anywhere, but it seemed like everybody else did and everybody else kind of. And also a lot of people just descending onto Seaside from all the surrounding beach areas. So it was a bit stressful trying to bike with the kids and trying to dodge cars like a game of Frogger. But thankfully everyone was safe and had a great time. Anyway, enough of that. Let's get into today's program. It's our mid year apartment market update. We got fresh data covering the first half of 2026 and especially of course, June and Q2, and there are some real surprises tucked into the data and mostly surprises on the upside given that, of course, the expectations for this year were pretty muted and including, by the way, some real momentum and one particular Sunbelt market that everybody loves to pick on for all its supply pressure. So we'll dive into that and then we're gonna have some fun. You're gonna hear in our conversation today from the managing director for research analytics at Graystar, Quinn Eddins. And you're gonna enjoy this because Quinn and I have some friendly disagreements and debates. He's gonna give you a different perspective on some topics, particularly around apartment demand. So again, two different takes on the topic and you'll be able to decide for yourself what you think about it. But we had a great conversation and a respectful debate. Quinn's a good guy and a smart. Very thankful to have him on today's show. All right, let's give a quick shout out to our sponsors. First and foremost, a big, big thank you to jpi, a leading apartment developer the stated purpose, to transform building, enhance communities and improve lives. Check them out@jpi.com as I've said before, JPI is in the cutting edge of some really exciting innovations in apartment development and construction. And they're doing it now all across the country. So jpi.com Also, big thank you to Madera Residential. Check them out at maderaresident and to Funnel, the AI and CRM platform that you can find@funnelleleasing.com all right, so as always, we kick things off a little section we call Here's a chart. And I'm going to give you my take on the state of the market here at the midpoint of 2026. And then again later, we're going to bring in Quinn to offer a little bit different perspective on it. And we're going to focus today's episode on apartment fundamentals. That's supply and demand, occupancy and rents. And we'll do another episode sometime in the near future, more focused on capital markets, you know, sales trends, cap rates and whatnot. So here we go. And this segment will be sponsored by my friends at ButterflyMX. Installed in over 20,000 buildings with over 100,000 five star reviews, they help you boost revenue, reduce costs and increase resident satisfaction by making property access simple. See how@ButtershellMX. Okay, so let's start by talking about supply. And I'm going to do this briefly because I think this is at this point the least surprising news. As many of you know, supply has been the big headwind for apartment operators these last few years. Historic supply wave, biggest since the 1970s. The way the wave really started in 2023 went through 2025 and now it's petering out. So this chart shows completions in the first half of each year over the last decade or so. And you can see that big surge, especially in 24 and 25, topped 200,000 plus units of supply in the first half of each of those years. In fact, almost 300,000 in the first half of 2024. Well, now here in 2026, supply, it's not totally evaporated, but it's way down. About 150,000 units completing in the first half of this year. And that's pretty close to pre Covid norms. We were completing right around 1 50,000 units in the first half of of the year through 2017, 18, 19. And we'll likely see those numbers drop off a bit more going forward. So supply is down finally, but still a lot of lease ups in the market. Properties that completed in 24 and 25, trying to get filled up. That's still competitive pressure on occupancy and rents, even though new deliveries are tapering off. But now let's talk about demand. Okay? And this is the big story, and I want to set the stage here by saying this. We've obviously had a lot of headwinds to housing demand in general and even apartment demand specifically this past year. Okay, We've talked about some of those headwinds. We've got choppy job growth, including the threat of AI taking away jobs. We got also in particular recent college grads struggling to find jobs. And that's a key demographic for apartments, obviously. We've also got a huge jump in the number of young adults living with parents again these last couple of years. That's taken away potential apartment demand. We also have some re acceleration in consumer inflation these past few months. We've got very low consumer confidence. So all of these things we would traditionally call headwinds to apartment demand. And you could argue, well, you know, on the flip side, no one's buying houses, so that's a boost to apartments and single family rentals. And you know, my answer is, yeah, kinda, but reduce move outs to purchase, that boost retention rates, which of course impacts net absorption on the back end. But it does not help create net new apartment renters because most would be homebuyers are probably already renters. And so again, it's a factor on net, but does not explain net new apartment demand. Okay, so those were the headwinds. And for those reasons, the there's been a lot of worrying about apartment demand so far this year. And again, a lot of it for good reason. And my thought, and the way I've explained it many times, and many of you heard this by now, is that yeah, these are real headwinds. I don't want to downplay it, but despite these things, apartment demand and apartment absorption, they've still been pretty good. Even though it's moderating, it's still pretty good. But. But I was certainly concerned about how these headwinds could impact leasing through the spring and into the summer. And now we got the data, now we have Q2 data. And this is the, I think the biggest surprise that we've seen and the data for Q2, which is these absorption numbers, and I got to tell you, the data from multiple data sources, it's not just one from multiple data sources, it's surprisingly good, probably better than anybody expected, at least for absorption. We'll talk about rents a bit later. So we are down a little bit from the big surge of last year on net absorption, but Q2 of 26 was still one of the best Q2 on record. So then, year to date through the first half of 2026, the demand story is again pretty darn good. Despite all those headwinds, Both CoStar and RealPage are showing net absorption through the first half of this year, topping a quarter million apartment units. So that means we have more than 250,000 additionally occupied units than we had going into this year. And that's a lot now to be fair. Again, it's down a little bit from last year's peaks, but it's still one of the biggest numbers on record and it's bigger than any year prior to Covid according to both data sets. So apartment demand, it's a positive story to me no matter how you spin it. And again, you'll get a little bit different perspective from Quinn later. But you know, my personal perspective is that it's a positive story no matter how you spend it, and it's probably above what anybody expected. I'm not gone back, I should say I've not actually gone back and compared it to the actuals versus forecasts, but I'm pretty sure these numbers likely topped what the third party groups forecasted. Now that demand, where is it going? Well, it's going pretty much everywhere, especially in those high supplied markets in the Sun Belt and the mountains as previously built apartments work through lease up. A lot of demand there, but good numbers across most other parts of the country as well. Okay, now before we go on, I want to be very clear about what we're talking about when we talk about apartment demand. You know, that word demand, it can mean a lot of different things and I hear a lot of perspectives there. When I bring that word up, it tends to trigger some people who want to argue about semantics. So to be very clear, when I talk about demand, I am usually referencing net absorption and net absorption. Again, I mentioned this earlier, but it's just a fancy term that basically means net household formation. It's move ins minus move outs. Or put another way, how many apartment renting households do we add or subtract? So I think it's the, you know, my personal take on this is I think it's the purest form of demand because it's achieved demand, not academic theoretical demand, not pent up demand. It's actual achieved demand. So that's an important distinction. And with actual demand exceeding actual supply so far this year, occupancy is improving. So here's a chart using apartment list data and it shows vacancy has improved in four straight months. And that's the first time this has happened since 2021. And similarly, CoStar, they're showing kind of the same thing. And whenever you see this from multiple data sets and real page is also showing occupancy room, by the way, whenever you see that from multiple data sets, that's telling me more than if I just saw it from one data set. And so you could be, you could kind of point holes and flaws and one versus the other. But when you see it from multiple data sets and different methodologies, that's, that's telling you something. And by the way, costar, they're showing stabilized occupancy improvement of 20bps in Q2, which is their biggest quarter over quarter lift since 2021. Now of course, there's a big hole still to dig out of. And so I'm not over here waving the mission accomplished flag for the apartment market by any means. There's still a lot of work to do, big hole to dig out of that historic supply wave of 23 to 25 that pushed down occupancy rates. But if this sticks, if this trend continues, you know, it's going to look like we may have finally hit an inflection point in Q2 of 26. Meaning like if we go on, they keep going on this path, think we're going to look back at Q2 and 26, Q2 of 26 as that inflection point for occupancy. All right, a few more thoughts. We move on from this. The occupancy improvement in Q2. I do want to add some context to this. This is what you would normally expect to see in Q2, it's normal seasonality. But the thing is we just haven't seen normal seasonality in basically six years for a variety of reasons, first through Covid and the high supply. So it's good to see that seasonal bump coming back this time of year. You know, this is the busy leasing season. You typically need to see that growth if you're an operator. So we saw that this year. Now, second thing I want to say is that not only are we seeing good absorption numbers in aggregate, but the financial strength of these renters coming in is also a big part of the story. Affordability is improving for apartment renters as wage growth has been topping rent growth for 40 plus straight months. So for all these new leader, sorry, all these new lease signers, I should say all these People signing a new lease in June in particular, for example, RealPage shows median rent to income ratios of 21.4%. And that's a very, very healthy number. It's coming down and it's way below that 30% affordability ceiling. So there's some cushion there, too, once rents start, start to rebound a little bit. So that's all the good news. But last thing I want to say about this topic before we move on is a little bit of a word of caution. You know, the numbers so far this year are certainly very good, but I also, I want to come back to those headwinds because they remain real. And I don't want to just. And I, I'm always. I always want to. I want to make sure I'm balancing this correctly. I want to, you know, look at. I always want to be data driven, saying, hey, the data is actually pretty good. But I don't want to completely discard these very real headwinds. You know, the job growth numbers, inflation, consumer confidence, those things are all out there. So it's no slam dunk that these strong demand numbers hold through the second half of the year and into 2027. It's not a guarantee. And in fact, I would still expect to see these absorption numbers further moderate incoming months, partly because of seasonality, partly because there's less supply left to absorb, and partly because those headwinds are still out there. So that's something to watch. But again, if we're able to maintain moderately strong demand, it doesn't have to be as strong as it was in the first half of this year. But if it's moderately strong demand, where supply, I'm sorry, absorption comes, stays above supply, allowing occupancy to recover. You know, if that happens, we should start to see stronger pricing power, as pretty much every operator has been expecting, hoping for in the second half of 2026 and into 2027. So we'll see again, still ways to go. Still headwinds out there. So I don't want to make too much of that yet. But again, we're trending in the right direction. All right, now, speaking of, the big hole we're trying to dig out of rents are another hole that apartment operators trying to dig out of, coming out of that big supply wave that put down our pressure on rents these past few years. But now that supply is going down, are we seeing some momentum in rents again? And we kind of are. It's not. Not a boom, not a big rebound, but we are seeing momentum. And I think the Best indicator of this is to look at Q2 specifically. So quarter over quarter rent growth, Q1 versus Q2 CoStar data shows Q2 quarterly effective rent growth of that's with the concessions of 1.2%. So that's the largest increase for any Q2 in four years according to CoStar data. So that's notable. And in fairness, there's nothing like we saw in 21 and 22. I mean back in Q2 of 21 we saw something like 4% rent growth just in that quarter. So 1.2% rent growth here in Q2 of 26, that's nothing like that. But it's getting closer to kind of pre Covid normal for this time of year. So just like with occupancy, we're starting to see some signs of normal seasonality returning. And RealPage, by the way, they reported a similar increase for Q2 at 1.4% which was also a four year high in their data. And also by the way, what's interesting in the RealPage data is you start is we're continuing to see this flight to quality phenomenon. Real renters moving up market, better recovery coming earlier in the class A market, in the class C market. So class a rents for Q2, they were up 2.4% in the quarter. Class B was up one and a half percent and Class C was basically flat. So and that's especially true by the way, in these higher supplied markets where we're seeing the flight to quality. It's less, less a phenomenon in the low supplied markets like the Midwest. All right, so another part of the national story by the way, has been concessions. And so real quickly I want to share this just because I think it's got, I get a lot of lot of questions about this. We are finally seeing a little bit of concession burn off. Not a lot, but some. The share of vacant units in stabilized apartments offering concessions, it fell by about 50 bips in June after holding flat most of the spring. So we'll see if that number comes down further. Now I've said this before, I'll say it again. I do kind of suspect that concessions could remain sticky and some operators could keep concessions while gradually pushing up the asking rent. So we'll see and obviously that can vary by operator strategy. Now one more thing on rents. I'm gonna look at the rent growth leaderboard here. Now this is gonna be year over year effective rent growth. And you know, the headline story is still the same in terms of who seeing the most rent growth. It's still the San Francisco Bay area, the Midwest, New York, and then the big resurgent market of 2026 has been Virginia beach, the Tidewater area. In recent months, that's been among the nation's hottest markets. But I'm not going to show you that chart. The chart I want to show you is this one we're now showing the screen here. It's the second derivative, the change in the change. What I'm finding, what I find interesting is where is the momentum? Where are we seeing momentum? So the second derivative, the change in the change, this is looking at year over year rent growth from March of 26 versus June of 26 over that last three months. Where do we see the most momentum? Okay, now brace yourselves for this. If you can't see a chart on your screen and you're just listening like what is on that chart? What's on that list? You're not going to believe it. So hope you're seated, seated somewhere. Number one, most momentum from March to June was Austin, Texas. I kid you not. Austin, Texas. Now this is the one mark everybody picks on as a poster child. Exhibit A for what happens. You build a ton of apartments, puts massive pressure on rents. And so to be very clear, rents in Austin are still down. They're down 3.9% year over year according to RealPage. That's still when the largest cuts across the country. But we're talking about momentum, the second derivative, the change in the change. So we're comparing that 3, 9 to a negative 7.5 from March. So that's a swing of like 360 bips. And that's the best in the country. Now we're also seeing continued momentum in the already hot San Francisco Bay area, and that includes San Jose and Oakland. Some momentum extending to the East Bay this year. And then the other ones in the top 10 list for Momentum are mostly Sunbelt Mountains, mostly higher supplied markets where rents are still down year over year, but less down than previously. And that list includes Salt Lake City, Denver, Jacksonville, Riverside, Tampa and Raleigh. So again, let's go back to Austin for a second. For all my Austin friends, maybe don't get too excited yet, there's still work to do. But again, we're trending in the right direction. Now. I heard someone, I heard an operator one time made a comment about Austin, which is, hey, you know, once it turns, it's going to turn hard and fast. And you know, Austin's not one of those markets that just kind of plods along at a kind of average rate for, you know, around the US Hour. It tends to be more of a boom bust, you know, hot and cold type market. So we'll see where this one goes. All right, so there you go. That's our state of the market as of the midpoint 2026. And again, stay with us because we'll come back to this topic later in the program with our conversation with Quinn Eddins. And again, Quinn's going to give you a little bit different perspective. We don't necessarily agree on all this, but we do have a fun and respectful debate about it. All right, next up, it's time for rental housing trivia. Today's trivia is presented by Authentic. If you're an owner, asset manager or developer running multifamily, here's the truth about leasing in 2026. A couple of ILS accounts and cross fingers won't get you to stabilization. The properties that are winning are running a tight ship across paid search and social retargeting, email and SMS nurture, all coordinated with one accountable team. Authentic built that system. They call it demand to door and it's one platform, one partner, one monthly number that scales to your velocity targets. Pod listeners get 50% off setup fees for a limited time. Head to auth and do ff.comd2d to see how it works. All right, so here's today's trivia question. Rent movement obviously tends to be seasonal. So what is typical apartment market rent growth in the second half of a calendar year? And we'll say typical as in like pre Covid, what was normal for the second half of the year? Total change in effective rents. And is it a typically up about 2% the second half of the year? Is it typically up 1%? Is it typically flat? Is it typically down 1%? Or is it usually down 2%? So give you five choices there. Which one is it second half of the year all in. And it obviously can vary from Q3 to Q4, but on but for the second half as a whole, what does that number tend to be? So give that some thought and we'll answer it in a bit. But next, it's time for in the News. Okay, in the News, when we review headlines impacting apartments and single family rentals. This segment this week is sponsored by the Kirkland company celebrating 20 years of helping investors source and sell multifamily assets tailored to their investment strategy. This week's featured apartment listing from the Kirkland company is the Hub a 936 unit class a master plan community spanning 63 acres in Bowling Green, Kentucky built between 2020 and 2026 across three phases and now fully stabilized, the hub is one of Kentucky's premier multifamily assets. Bowling Green's population has grown 9.5% over the past five years and the property sits within a trade area boasting an average household income exceeding $102,000. To learn more about the hub and other investment opportunities, Visit. We sell apartments.com the Kirkland Company we sell apartments. And that data and information all comes courtesy of the Kirkland Company. All right, so first headline, Marriott is getting into the apartment business and this will be under their W Hotel brand. Okay, so here is the headline from Multifamily Dive. It says Marriott open first branded apartment rental property in Cleveland. W Cleveland is slated to offer 200 hotel rooms alongside 227 branded apartment units available for rent with tenants having access to the hotel's amenities. All right, so Marriott previously dabbled with short term rentals and you may remember the headline, they they recently severed a relationship with a short term rental provider. And they have also had buildings in the past and still do, I should say, that have both for sale condos and hotel rooms. But this will be their first building with traditional apartment units available for rent. Plus obviously they'll have hotel rooms as well. It's going to be in Cleveland, Ohio, a wonderfully underrated city and also one where by the way, hotel prices are always oddly, incredibly expensive, at least whenever I visit there. So I'm glad to see they're getting some new hotel rooms too. The apartments, they'll be called W Apartments. Cleveland will open in 2027, will include 247 concierge service at Dorman, Belmond and W hotels, exclusive residential programming and events. So that'll be interesting and obviously be curious to see if they bring this model to other cities as well. Very interesting. Next headline comes to the Wall Street Journal says New York City hasn't built this many apartments since 1965. A rush of new supply is still dwarfed by a 400,000 unit deficit of homes in the New York City metro area. All right, so the article says New York City added 380. I'm sorry, not 380, not even, nowhere near that. New York City added 38682 units last year, most since 1965. And that's obviously a positive in the right direction. But I want to, I hate to splash cold water on this positive headline here, but I do want to give two quick pieces of context. Okay, number one, New York City has something like 2.3 million apartment units. So adding almost 39,000 units, I mean every bit helps. But this is a drop in the bucket for a city its size. It's, it amounts to an expansion rate of less than 2%. You know, by comparison, Austin was at peak expanding at 10%. So when you're growing supply at less than 2%, you know, that's, we'd still consider that low supply and you're not really changing the supply demand environment that much. Second thing I want to say is that it just takes longer to complete a project in New York City than than it does in most of the country and for obvious reasons. So anything that completed in 2025, those projects were more than likely in planning and starting construction years ago, long before most New Yorkers even knew the name Mamdani. So I wouldn't look at this number as some kind of forward indicator. And the article, by the way, it also points out there was some rush by developers to build apartments prior to some changes in the zoning and development incentives given the expiration of the 421A program. As some of you may recall, those rules changed in June of 2022. So a lot of the projects completing in 2025 had to, you know, get a lot of them rushed to get approval prior to that June 2022 date, as the article points out. So I don't think this is necessarily sustainable even though obviously a lot of efforts to keep construction going there and to varying degrees of success. But I did see an article recently from Costar saying that multiplaying construction in New York is down 30% from peak. So again, I'm all for new supply, not trying to splash cold water. And the good news here, but had that little bit of context. All right, next headline comes from Biz. Now it says we dodged a bullet Mass. Massachusetts Multifamily Market starts to thaw after Rent Control ruling. All right, so I saw this headline and my first thought was you didn't dodge a bullet, you dodged a boomerang. You know, there's still this anti science rent control push in Massachusetts. It's not going away, it's just delayed and we don't know ultimately where it's going to end up. But I don't think that fight is over. You know, remember, you know, there was this ballot initiative supposed to hit the Massachusetts voter elections about a ballot measure for November of this year. It was dismissed by the courts, but only on a technicality. So they're more than likely going to be back. So again, it's probably more of a boomerang, not a bullet that you're dodging if you're in Massachusetts. All right, let's get back to this week's trivia question presented by authentic what is typical apartment market rent growth in the second half of a calendar year, especially pre Covid plus 2 plus 1 flat, negative 1 or negative 2? If you said basically flat, you are correct. Pat yourself on the back. And that again, this is for the entire back half of the year on average. So in typical year we would normally see some rent growth in Q3 and then you pretty much give it all back in Q4, averaging out to basically zero, give or take, at least nationally. It could vary by market, of course. Now here's a little bit of an interesting tidbit for y'. All. Last year in 2025, it was an unusually bad second half of the year. It was the worst second half of the year in 15 years. Rents fell about 2%. And so for here in 2026, what happens is going to be. Let me rephrase that. So I think as we remove that negative 2 from the equation in the year of year calculation, what happens in these next six months that's going to be really interesting in how that shapes the year over year number. So even if there's no rent growth at all in the second half of this year, like normal, it was just flat, that would bring the year over year rent number back up to close to 2%. Just, just because, just based on the growth in the first half of the year. Now obviously a flat scenario, that's not a given, it's just a scenario. But that would, that, that's just how much the, the, the big cut from last half, the last half of last year is impacting the current year of year rent numbers. All right, next up, it's time for today's interview sponsored By Funnel, the CRM, an agentic AI platform trusted by four of the six major REITs whose AI recently beat three major competitors across six independent third party conducted blind studies. Nearly three in four renters preferred Funnels Chat AI and two in three chose their voice AI. Visit funnelleleasing.com to see it in action and try it yourself. Okay, so by now you probably know. Today's guest is Quinn Eddins, the managing director for research analytics at greystar, which I'm sure almost all of you know ranks number one on NMHC's top 50 list for owners, managers and developers in terms of size. They now manage more than a million multifamily units across the U.S. so Quinn has quite a bit of data at his fingertips and a good pulse on the market. Now again, before we jump in, I said this for us when I brace you all for this. You know, I've known Quinn a long time. He's a friend, super smart guy, good pulse in the data. But we just have different takes on state of the market right now and I love it. I think it's good, it's healthy, it's good to have a good debate and Quinn's a good guy to have that debate with. So you'll hear some friendly disagreement in this conversation. You know, not, definitely not wildly different perspectives but, but certainly different enough on the current state of the market. I think we're probably more aligned on the longer term drivers. So enjoy the debate and hopefully helps you better inform your own perspective on the market and where it might be going. All right, welcome to the interview portion of today's podcast. And I am honored to welcome in my friend Quinn Eddins, head of multifamily research at gracetar. So Quinn, thanks so much for being here with us.
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Hey Jay, thanks for having me. This is going to be really exciting.
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Yeah, I'm excited to talk shop. Obviously a crazy time of year and everyone's wondering what's going on and so hopefully we'll shed some light. Before we get into all the fun stuff though, love to the audience to get to know you a little bit. And so how did you get into this wonderful world of multifamily research?
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B
Yeah, that could be a whole podcast episode on its own, I guess. I mean, not to sound narcissistic, but it's. I think it's pretty interesting story. So I wrote my master's thesis on risk management strategies for single family developers using property derivatives. And so this was back in 2008 and property derivatives then were this niche kind of newcomer to the capital markets. They were basically derivatives products that were traded over the counter on Wall street, but they weren't the credit default swaps or the mortgage backed securities or debt related derivatives. They were forward contracts that were settled based on housing price indices of which at the time there was Case Shiller, which still survives today, and there was another firm called Radar Logic that were making housing price derivatives that were focused kind of for the purposes of trading these derivatives. And actually the larger market for this niche asset class was based on the Radar Logic derivative. When I got hired on, I was, I think an analyst, but this was 2008 and of course it turned into be a pretty tumultuous time. And so by the time I arrived, the director of research had left. And so I kind of got a battlefield promotion to director of Research. And so I wrote a research note, monthly research note, that at the time when we were making money based on the, you know, the spread and trading, the research note was like a business development tool or, you know, something that was useful for traders, people who are interested in trading, to kind of get an idea of the commentary around the indices. But then of course, the global financial crisis happened and after Lehman Brothers went bankrupt, basically trading in all esoteric, illiquid derivative products went to zero. Not just us, but us included. And so that opportunity came in the form of a offer to join CBRE in Miami to run their research group focused on the Florida market. But also part of my remit was to cope lead the group that tracked multifamily nationwide co lead with Jeanette Rice. So Jeanette and I would write their quarterly multifamily reports during my time at CBRE Nationwide. And after being there for a few years, I was recruited to come work at greystar as their director of research and analytics. And my role at greystar is kind of, it's special, it might be unique in the industry. I'm not, I'm not sure in that I'm focused. I sit within the management services group and so my, you know, as opposed to the investment research and strategy group. And so my external audience are property owner management clients, you know, tend to be asset management more heavily on the asset management side, say than the investment strategy side. But still, you know, it's a, it's a, it's a very important constituency for us. So I, I give, you know, I provide research and insights to that, to our, to our management clients and of course, you know, insights to our internal leadership group focus primarily on the management services business. But also, you know, there are times when I combine forces of my team with the investment strategy research team on the investment side of the business. And we, you know, we, you know, join forces pretty frequently as well.
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A
You have an important role because you sit in between obviously property managers who are, you know, managing more than a million units and you've got, you know, and they're seeing things in real, real time. And of course these owners and asset managers who, who are ultimately control these assets. So you have a good view, I think, of both sides of the, of the business. And so, you know, given your kind of unique purview you have, I'm curious, like I want to get into how you see this year playing Out. Before I get into that though, just what's your, what was your going into this year? Just at a high level. What were your expectations for demand and rent fundamentals for 2026?
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B
So my. So in back in 2025, my expectations were. Were really low coming into 2025. Right. And so I was, as 2025 progressed, I became more and more optimistic because it kind of became clear to me that, you know, we might get out of this without seeing, you know, nationally, you know, significantly negative trade out in year over year rent growth. And so as we. So because my expectations were so low, I was an optimist this year. My expectations were higher. You know, what with the saying last year was fixed in 26. And so I was like, you know, I was coming in thinking, no, we're going to see, we're going to start to get back into, you know, written move back towards normal, normal rent growth kind of trajectory in 2026. And that hasn't happened. And so, and it has become clear to me at the beginning of the year that that wasn't happening. My outlook became more and more pessimistic. So I could say. So I guess I should say, to answer your question, my outlook was. My expectations were high, higher than they should be. And that's been really bad for my mood.
- [36:50]
A
All right, so now we're halfway through the year, so you've kind of teed this up a little bit. But, you know, tell me more about how this year's playing out relative to what you expected. And before I do, I just, maybe for the sake of the audience, I'll just, you know, I've been making the case that, you know, to me, and, and in some ways it feels like the most predictable year since COVID hit. Meaning that like it's. I mean, obviously there's different views on this, but I think generally the view is, hey, it's going to get a little bit better, but it's not going to be. 26 is not going to be the fix necessarily. It's going to trend in the right direction. So we've seen limited growth, more subdued relative to normal, but I would say slowly trending in the right direction. So how would you say the first half has played out? And feel free to disagree with me.
- [37:34]
B
Yeah, I'm going to disagree, but only slightly. And I, I think we're trending in the right direction. If you look at the second derivative, right, it's getting worse more slowly, but I think it's. Look, I think we are. And I know this is going to come to bite me in the end but I think we are at a bottom this year in this rent growth related to pick a metric in that I think I don't know what quarter it's going to be and I don't know whether it was turned out to be a Q2 or it'll turn out to be Q3 or Q4. But I think if we zoom out with the benefit of hindsight in a year or so it's going to look or two years we'll see that 2026 was, was the bottom of the cycle in terms of so called trade out. And so and that's kind of, I mean we're certainly the trade out numbers that we're seeing now for May are below the trade out numbers we were seeing last May. Right. And those are below what we saw in 2024. So now. So the numbers are lower but they're still positive, right? Well in May they were positive and that's the latest numbers that I'm looking at.
- [39:02]
A
So this may have a combined trade up. Combined trade out. Combined trade out still positive. New and renewal.
- [39:07]
B
Yeah, very important point. Combined. So looking at new leases and renewals, if you looked at new leases on their own that's negative. But renewals have been saving our bacon, you know and keeping us above water. So. So when you ask you know what I think so I think if there's daylight between what you are seeing what I'm seeing, it's like maybe I'm. I think we're at a bottom. I don't see us currently now trending up. I see us basically trending sideways and it might be not a V shaped recovery but more of a U shaped recovery as measured in quarters though I think and hope that again we'll see that lease trade out in 2026 will prove to be lower than it was in 2025 and lower than it will be in 2027.
- [40:07]
A
Well then I would say one thing though and I'm curious if you again feel free to disagree is that I feel like getting into the summer and fall we're going to have some very favorable comps versus last year and that could help prop up those numbers. Not that it's dramatically better, but maybe not as bad. Is that a fair take?
- [40:24]
B
The amplitude between trough and seasonal. Trough and seasonal peak just does not seem to be very big in 2026.
- [40:32]
A
I agree with that.
- [40:33]
B
The peak in 2025 is much higher. So right now we're at trade out is. I don't have it in front of me, but measured in full percentage points lower than it was May of 2025. I think whether maybe what you're saying right, it did come, there may be a seasonal difference there that will make it look better in the fall. But again if you widen the purview a little bit in terms of time and just look at it where we are this year versus next year, I think overall we're going to be lower than last year.
- [41:11]
A
I guess I was making the point that last summer and fall, at least for the industry at large was so weak. I mean that was, that was the trade up. The rent numbers, I should say on the, the rents and concessions were so high and that so weak in that period that it pulled down the overall trend. But Quinn, let's talk about demand now. And, and I will before I get into this, I want to make the point that I've learned to have to add this caveat a lot, which is obviously mean. Again, you sit between asset managers and property managers and property managers, they're measuring demand terms of leasing activity. You know, asset managers, investors, they're looking at in terms of absorption. So I'm going to talk about absorption for a minute. Okay. Because everybody knows the leasing numbers been challenging still. You know, we're a lot of supply, a lot of lease ups that are taking a long time to lease up. But, but we're talking about absorption. You know, I, I, my take on this is that feels like there's glass half full and glass half empty people. If your glass half empty you say hey, these absorption numbers are trending down. Job growth is weak. Young adults coming out of college aren't getting jobs. Sign of market softness. If your glass half full you'd say yes, it's, it's trending down, but it's coming down from all time highs that nobody expected to be sustained. And I just looked at the Costar and RealPage absorption numbers for Q2 and the first half of this year, while less than last year, is still way above pre Covid norms in terms of net absorption for the first half of the year. And so overall it seems like the absorption numbers macro level, not leasing, but macro absorption is pretty good and probably would be a lot better if we had even better job growth, especially for these young adults. So that's my take. But again, feel free to disagree. What's your take on the absorption numbers you've seen so far?
- [42:51]
B
So I agree with facets of your take and I see some things a little bit differently. I would be on the glass half empty Side, not because of job growth, because actually job growth is better this year than it was last year. I mean, in 2025, we averaged something like 15,000 jobs a month. And so far in 2026, I think it's somewhere closer to 100,000 jobs a month. Now putting that in perspective, back in 2021, we regularly had monthly job growth above half a million and some months,
- [43:28]
A
but that was a gnarly.
- [43:30]
B
Right. So it's not great. But I mean, so job growth tends to be pretty good. I mean, my pessimism around demand is more a function of inflation, real wages and real wage growth after tax, real wage growth is basically flat and consumer sentiment and expectations are near record lows. And so if you are doubled up with a roommate or you're living with your family and you are feeling the squeeze of maybe not rents going up, but every the other, you know, everything else you buy prices going up and you're feeling, you're feeling the squeeze and way your wages aren't really keeping up. And, and you're also just gloomy about, you know, the state of the, you know, of, of your situation and prospects. You're not really likely to create a new household. You know, this doesn't, this probably doesn't feel like a good time to move out.
- [44:34]
A
Not agree with that. Yeah.
- [44:35]
B
And, and, and, and start renting an apartment. Rent growth is not great. I'm not. Sorry. Not rent. So job growth is not great. But it is, you know, it is better than it was. And so if that continues, then that could counteract that. But that, but yeah, it's, it's generally like kind of the, the, the mindset and affordability challenges of the renter and would be renter are kind of why I'm glass half empty. And then when it comes to absorption, I always get tripped up a little bit of absorption as a indicator of demand. Because absorption is the change in occupied units during a period. And so that is a function of both, of underlying demand. It's also a function of supply. Right. Because you get. So I, because you know, and this is in the context of a secular housing shortage.
- [45:44]
A
Right.
- [45:44]
B
I think demand is always riding above the supply. So as we've seen in 2024 and 20, early 2025, you, you have an enormous increase in supply entering the market. Those units are going to be leased up and they're going to be counted as absorption even if the underlying level of demand doesn't increase. And so I think the absorption spike in 2024, 2025 that we saw Was, Yeah, it was more of a function of much more supply coming online. Not an increase in the number of latent demand would be renters, it would be demand. And when you have that situation, you lease up the units, but it comes in the form of competition between properties. You have the same, you have the same underlying demand. But if you own a property, you're competing with more units for those renters and you compete by lowering rents and offerings and concessions. And so that's what we're seeing. So using. So yes, absorption is coming down, but I read that more as just as a function of the decrease in deliveries since the beginning of last year. Kind of fewer units coming onto the market means fewer entering lease up and less absorption and not so much as an indicator of the underlying demand for housing. Rental housing is going up. So that's my spiel on. I don't think absorption is capturing the demand trend necessarily.
- [47:30]
A
No, I love this. This is a good debate. So absorption is really renter household formation. It's new additional households being created that are living in these units. And obviously you're right. So supply is a big part. I tell people all the time, it's like San Francisco, even in boom times like now ranks low on absorption because it doesn't have a lot of supply. Right. And so absorption is a big part of this. However, someone still has to want these units that are new in other parts of the country and qualify for it and lease it. And that's happening. So like, you know, I was looking at the coasters right in front of me right now. It's like the first half of this year we had 250 or 225,000 something new renter apartment households formed in the first half of this year. It's better than any year prior to 2021. So what other, I mean, what do you see is obviously supply. You mentioned there's pent up demand from under supply. But like, like what's amidst all these, and I agree with you, consumer confidence, I think is actually the number one threat right now to a lot of things, including apartment demand. So what's driving these absorption numbers beyond the fact that somebody built an apartment because somebody sells to want it and qualify for it and lease it.
- [48:38]
B
Yeah. I guess my view is that person was there, might have, might have been there. And, and with the, with the introduction of the uni unit and the competition they created and the reduction in rent, that person was able to afford it. Well, I think it's trailing off. Right. I think absorption is coming down and
- [49:02]
A
so it is the supply comes down. Yeah.
- [49:04]
B
And as supply comes down. So I think what was. Yeah, I think what was driving it was a function of a relative stability, but not real growth in the, in the demand from households, but I. And a peak in supply that we're now coming off of. So I think it was, you know, yes, the renter household was being created. But I think the over, if you include latent demand on top of that, that sum didn't change in the way it did in 2021. We've really seen like a dromedary camel Humphrey, you know, since COVID there was an enormous peak in absorption that was driven by post Covid. You know, people were flush with savings, you know, job growth was growing very rapidly, and they were getting really sick of living with their roommates after Covid and they moved out. That was a creation of net new demand. And you saw absorption rise up. Now, that was of course, only to a certain extent, drawing demand that would have happened later, forward in time. So then you saw. And that caught up. And then you saw a drastic reduction in absorption. It even went a little negative in 2022, 2023. And then you've seen a second hump which has entirely corresponded with the increase in deliveries. And now that that delivery hump has come down, you're seeing the commensurate hump in absorption come down. So again, by my way of looking at it, Hump 1 was a, if temporary, it was an actual increase in the underlying total demand for housing, at least during those periods. And the second hump is, again, I just, I think if you include a notion of latent demand, those households that were created were just substituting actual occupants, occupied units for latent demand or vice versa. And that's coming down. So I guess, Jay, we'll see what happens with supply and how absorption will, you know, and how absorption follows it. I mean, absorption is already coming down. But I mean, if, if, if there has been an increase in overall housing rental housing demand, then I guess you would expect the, you know, absorption numbers to even out at a higher level than if I'm right. And it was just driven by, driven by new units. And we can kind of maybe look at historical trend and see, get an idea what's the case.
- [52:13]
A
Well, again, I don't disagree with that point. I think supply is definitely part of the story. I just think we're undercounting the fact that we had two. I just looked at, again, 255,000 new apartment renter households over the first half of this year. And that's a significant number. So let me ask you a related question. You mentioned a good point, which is that especially we had a couple of years where we were seeing wages grow faster than, than inflation. Now these past couple of months we've had a re acceleration in inflation and now except post tax those numbers aren't as favorable. But the trend that we've been hearing From Public Trade REITs and from others in the industry is that affordability in terms of people who, not the broad US population but the people who are actually signing leases and market rate apartments, which is a whole different story. This is always my beef with sometimes the affordable housing advocates who sort of missed this point. It's like you look at who actually is leasing, it's a different story. And so I'm curious, are you seeing the same thing which is that rent income ratios are coming down due to the fact that wages have been growing faster than rents and, and the general trend being affordable, affordable improvements in affordability for those who are coming in?
- [53:22]
B
Yes, yes and no. Yes, we, the, the rent to income ratios are coming down and we are seeing that. But I mean over that same period rents have come down.
- [53:41]
A
Yeah.
- [53:41]
B
Right.
- [53:42]
A
So that's part of it.
- [53:43]
B
So and, and so and whereas since through last year, I mean the, about, you know, the real after tax incomes have been flat. So I think the falling rent to income ratios are more a function of the rent side of the equation than in the income side of the equation. All things being equal, I guess in my mind I discount the rent to income ratio as a sign of, of, of healthy, you know, of, of increases in or health of the demand side of the equation. Because again supply is so, because the income or the rent some income.
- [54:39]
A
No, no, of course, yeah.
- [54:40]
B
And the other point that you made I completely agree with, which is the kind of selection bias in the folk, in the households that are renting right now, they're the households that are able to rent right now which are, which are not representative of households in the US writ large nor are they probably representative of the potential market for rental housing. So yeah, we're seeing, and that relates to the interpretation of the rent to income ratios. Right. Because the, the folks that are able to rent can afford it. Right. But that's if, if you're looking for, you know, the renting the next unit, you know, if you, as you get through that cohort of people who are doing pretty well right now, it, it's, you know, you, it'll be harder and harder to, you know, to rent the additional unit. And so, you know, I don't know if the trend in rent income ratios there's really indicative of, I don't know if you could follow that and project it out and expect that to be a indicate kind of future demand because I think we're running, we may run out of that segment.
- [56:04]
A
I agree. I think when you talk about rent to income ratio, it's more about if they're coming down and largely because of concession and rent cuts, obviously including at least some wage growth at the same time, you know, that that gives some cushion to absorb some rent growth once the market starts to recover. Now, obviously not, no one's talking about double digit rent growth again, but some normalization of rent growth. But now let me, let's, let's talk, we're talking about national trends. Let's jump into markets. And obviously right now we've seen a lot of strength in the San Francisco Bay Area, New York City, parts of the Midwest, and now Virginia beach is the new hot market. No supply in most of these spots. I assume you probably see the same. So beyond the obvious, because we talk about those a lot,
- [56:44]
B
the key thing,
- [56:44]
A
everybody's talking about green shoots right now. Where are the green shoots? So are you seeing, can you talk about any places that you're seeing emerging pockets of strength? Is it abc? Certain types of submarkets, urban, suburban, certain markets give us some positives.
- [57:01]
B
Well, I would say one positive, and this may be somewhat controversial, but I see Nashville has been ahead of the national curve and ahead of the Sunbelt curve this whole cycle. It ran into trouble first and now it seems to be emerging from trouble first. In May, the lease over lease tradeout for Nashville was positive for the first time in 18 months. More so positive trade out there, you know, and if you looked at, I don't have as up to date of figures as you were looking at you mentioned, I'm still looking at Q1 numbers, but I did an analysis where I looked at kind of our 30 largest markets, which basically map onto the 30 largest, you know, metro rental markets. And I, you know, looked at the inventory growth, supply growth as a percentage of existing stock in Q1 2026 and the real page forecast for Q1 2027. I rank the markets accordingly by the variance. Right. So in other words, where is the supply? Growth either increasing faster or at the top of the spectrum it would be decreasing faster and at the bottom of it would be increasing fastest. And Nashville is in the top of the list, meaning that the, you know, it Projected supply for Q1 2027 was 1.9% of existing stock and that's down from 3.5% this year. And you know, with the big old caveat, it's like assuming, you know, the veracity of RealPages forecasts that's a, that's a really big decrease. That's a, that's a you know decrease of like 163 basis points, you know, as, as so again that's unit new units is a share of existing stock. And so I mean I'm, I guess I would say Nashville seems to be leading the pack and I'd say another one that seems to be doing well relatively to other markets is Atlanta and I would say probably Raleigh as well. It's funny, Phoenix is actually expected to have their rent growth decrease at you know, high, at a high rate relative to other markets. But even as of next year it's still going to be growing at over 3% of existing stock. So it's, you know, I can't point to Phoenix as a green shoot. I mean it's, it is seems to be on a good trajectory but it's even a year from now it's still probably going to be have a lot of supply is working through.
- [60:01]
A
Yeah and I mentioned this last week. I think Phoenix is also kind of an east side west side story as well depending what part of the metro area you're on. And so let's talk more about this again. These high supplied markets, the story seems to be at least to me that these peak deliveries are behind us in terms of just pure completions. But we have a lot of what I call or it's not like I coined this term, just excess excess lease ups in the market. And it seems to me that until those units stabilize, leasing is going to be a slog. It's going to be very competitive. It's going to limit rent growth, keep concessions high and obviously the timing is going to vary by market. But when do you think the first Sun Belt markets get there? And then you mentioned Nashville, Atlanta, maybe other others that we put in that group have the best chance of being in the first group of markets that see occupancy stabilize and then get not just, you know, less negative rent growth, rent cuts but actually get to some rent growth 2, 3% or whatever it
- [60:56]
B
may be looking at trade out alone. National's already past that threshold of being positive. So is Atlanta in our portfolio in the Sun Belt whereas most other, all other of our major Sunbelt markets I think are negative when it comes to trade out. So I would say yeah. So I sort of when could be in that respect when we see if it's judged by the first markets again, we'll see what happens in the second half of the year. But by certain metric, Nashville, Atlanta have already passed that threshold. So when could be now. But I think there's going to be a big difference between when Atlanta and Nashville get there and when Phoenix and San Antonio and Austin get there.
- [61:46]
A
Oh, I completely agree. Yeah. So. So when do those laggards get there in your mind? Is it 27 a year from now? Is it 28?
- [61:53]
B
28, yeah. I mean for the laggards. Yeah. And I'm even so I look at kind of getting back to the demand story. So supply is, seems to be. Have come down, letters have come down, but now starts. Have started ticking up again. Right. So it's like the, the increase, the improvement in the supply situation seems to be moving into its end phase. You know, it has run its course. You know and so we're. And, and I just see demand, the demand headwinds that are keeping me up at night. You know, the just affordability and consumer confidence sticks that are very hard for us to forecast. But it just, I guess the macroeconomic milieu, I mean the expectation of kind of durable inflation trickling through and not just in energy, but the impact of the tariffs and hangover from the impacts of energy trickling through to other items, just inflation in general, affordability challenges, the kind of the dismal view of the consumer. All these things. I don't see a. And not to mention interest rates unlikely to come down. I just don't. I see just like I see GDP growth being in a positive but kind of like weighted down kind of phase. I see that being a very similar story for rental housing demand. And so I don't see a lot. I don't see a big. In the next year, I don't see a big driver of new household formation and a new driver of housing demand. And you're getting again the, the, the incremental improvements in the supply situation is going to get less and less and less. And so I guess. Yeah. And none of this really impacts, you know, the coastal markets you mentioned with high barriers to entry. I mean they're sitting pretty but.
- [64:02]
A
Well, some of them are not all.
- [64:04]
B
Yeah, but the more gen. No, the markets that tend to be more functional in the, you know, that you can actually build there. I just see like. Yeah, again, I don't, I see, don't see the Supply situation getting better, dramatically better quickly and I don't see the demand situation getting dramatically better. So I just think it's going to be a long attrition of absorbing and you know much it'll take longer than anyone wants it to in, in the most supply impinged markets.
- [64:38]
A
All right, so then I'm going to put you on the spot here. So finish this sentence for me. The Sunbelt, the overall average and I mean I'm sure you remember this but for those listening, I mean the Sunbelt outperformed the US average for rent growth from I think it was 2013, 2022, then obviously 23 to present. It's been underperforming. So finish the sentence for me. The Sunbelt average rent growth will top the national average again by when?
- [65:02]
B
Okay. Given everything I just said, I'm going to say 2028, but I am going to put a lot of emphasis on the word buy, which means if it happens in 2027, I'm still. Right.
- [65:19]
A
Yeah, very fair. All right, so let's just big picture. You've talked a lot about some of the things you're worried about, know structural affordability and gdp, but consumer confidence. Anything else you want to mention on what you're worried about. But on the flip side, I want to, you know, tell me what would make you wrong? Like what, what are some tailwinds that would make you feel more optimistic?
- [65:41]
B
Well, so I, I won't say anymore. I think I've said enough about why I'm pessimistic. What would make me optimistic?
- [65:47]
A
Yeah.
- [65:48]
B
Is I, you know, if you, I was wrong before, like I said, like I said at the beginning, I was wrong about 2025. I thought it would be much worse than it turned out to be. It's not terribly good, but it's not nearly as dire as I expected it to be. So I, you know, if those who have, would bet against, you know, the US economy at least, you know, you know, in raw, in just sheer numbers would have, that would have been a losing bet. And so, you know, I think there, and the fact that so, so one, I think there is definitely room for the, you know, GDP growth driven, you know, by the tech sector to outperform my expectations as I've laid them out here. You know, we, there were, there are a lot, there's a lot of new, you know, the, the growth in the tech sector is reverberating through the economy in ways that may be predictable but aren't necessarily first order effects. Right. You're minting how many billionaires were minted when SpaceX went public? And a lot of these folks are going to start family offices and that's going to feed investment throughout the economy. And so there could be, you know, a, well, not strictly speaking wealth effect, but a more general wealth effect in the economy from the benefit of that, of that sector that could, that could definitely, you know, create an up, you know, growth that would prove me wrong and I'll go back to job growth. You know, job growth while, you know, up from a very low, it is trending upwards. Right. And so I could be wrong in my expectations that it's going to continue to be kind of milquetoast. I mean it could continue to, it could increase kind of following the, you know, my thesis on the potential, you know, second order effects from, from the growing tech sector. So I think if I were proved wrong, what would happen would be overall economic growth outperforms. It performs better than meh, you know, actually performs well. And that rank growth, you know, outperforms expectations. And if those things and those things can happen.
- [68:20]
A
Yeah. Well, Quinn, this has been great. I appreciate the friendly debate here and it'll be fun to see how this plays. Hopefully it'll be fun to see how, hopefully we're not depressed and we come back on this and revisit our thoughts here. But thank you for your time and best of luck in the second half of this year.
- [68:38]
B
All right, thank you, Jay. It's been fun.
- [68:58]
A
All right, big thanks again to Quinn for being our guest today and thank you also to JPI Madera Funnel Authentic, the Kirkland company ButterflyMX, and also to my friends at Apartment Life. And thank you to all of you for spending part of your week with us. We'll see you next time.