The 2026 Apartment REIT Boom: Why High Homeownership Barriers and Supply Constraints Make This Sector a Contrarian Buy

The U.S. apartment REIT sector stands at a pivotal inflection point. While 2025 has been marked by mixed performance and valuation dislocation, the confluence of persistent homeownership barriers, easing supply constraints, and undervalued fundamentals positions multifamily REITs as a compelling contrarian opportunity for 2026. Investors who recognize the sector's long-term resilience amid short-term headwinds may find themselves poised to capitalize on a potential rebound.

Homeownership Barriers: A Tailwind for Rental Demand

The U.S. homeownership rate remains stubbornly low, with 49% of Americans deeming it unrealistic to purchase a home in 2025 due to affordability challenges like soaring interest rates, home prices, and taxes. This sentiment persists despite 51% of respondents still expressing intent to buy, underscoring a growing affordability gap that locks millions into the rental market. According to a report by PwC, this structural shift toward renting-driven by demographic trends, economic uncertainty, and migration to more affordable Sun Belt markets-will sustain demand for multifamily housing for years to come.

The implications for apartment REITs are clear: a shrinking pool of first-time homebuyers and a growing cohort of renters create a durable floor for occupancy. Even as rent growth moderates-averaging 3.8% year-over-year in Q2 2023 compared to 12.8% in 2021- the sector's demand base is expanding. REITs with exposure to Sun Belt markets like Nashville, Dallas, and Phoenix, where population growth outpaces supply, are particularly well-positioned to benefit.

Supply Constraints: A Catalyst for 2026 Recovery

The apartment REIT sector's near-term struggles stem from an oversupply cycle that peaked in 2024. Record completions of 592,000 units in 2024-marking the largest one-year increase since 1974-exacerbated vacancies and pressured effective rents, particularly in Sun Belt markets. However, this oversupply is now reaching its inflection point. With construction costs and interest rates curbing new development, completions are projected to decline by over 40% between 2023 and 2025 according to REIT analysis.

This slowdown in supply will narrow the gap between demand and inventory, creating a tailwind for rent growth in 2026. As stated by Trepp, the absorption of excess units in Sun Belt markets-where occupancy rates have dipped due to oversupply-will likely stabilize pricing power by mid-decade. Coastal markets, meanwhile, have already demonstrated resilience, with Northern California and Boston benefiting from AI-driven job growth and limited forward supply according to RealPage analytics. REITs with diversified portfolios across these regions are best positioned to navigate the transition.

Valuation Dislocation: A Contrarian Opportunity

The apartment REIT sector's current valuation represents a significant dislocation relative to its fundamentals. As of November 2025, the sector trades at a P/FFO multiple of 15.59x, the lowest among REIT sectors and well below the 30.89x multiple of self-storage REITs according to Multihousing News. This discount reflects investor skepticism about near-term rent growth and supply-side challenges, despite occupancy rates averaging over 95% in key markets according to RealPage data.

The dislocation is further amplified by the sector's net asset value (NAV) discount. As of September 2025, the average REIT traded at a 14.10% discount to NAV according to 2nd Market Capital, suggesting undervaluation for operators with strong balance sheets and disciplined capital allocation. For example, Equity Residential and Camden Property Trust reported occupancy rates of 96.6% and 95.6%, respectively, in Q2 2025, even as they navigated macroeconomic headwinds according to RealPage analytics. These metrics highlight the sector's operational strength and its potential to outperform as valuations normalize.

Looking Ahead: Strategic Positioning for 2026

The path to a 2026 apartment REIT boom hinges on three factors: geographic diversification, expense control, and capital discipline. REITs that have shifted focus to high-growth Sun Belt markets-such as Equity Residential's pivot to Atlanta-and optimized portfolios through redevelopment or selective acquisitions are best positioned to capitalize on the recovery according to Credaily research. Additionally, operators that have leveraged cost savings in property taxes and insurance to offset rising interest rates will see improved margins as supply pressures ease according to RealPage data.

J.P. Morgan Research forecasts 3% FFO growth for REITs in 2025, with a slight acceleration expected in 2026 as capital markets stabilize according to J.P. Morgan insights. This trajectory, combined with the sector's current valuation discount, suggests a compelling risk-reward profile for investors willing to adopt a long-term perspective.

Conclusion

The apartment REIT sector is at a crossroads. While 2025 has been defined by moderation in rent growth and elevated supply, the underlying fundamentals-persistently high homeownership barriers, easing supply constraints, and undervalued assets-point to a 2026 rebound. For contrarian investors, the current dislocation offers a rare opportunity to position for a sector that has historically demonstrated resilience in cycles of economic and demographic change.