MMG - Q2 2026 MULTIFAMILY MARKET SNAPSHOT KEY TAKEAWAYS

 1- Trailing four-quarter absorption of 21,910 units has surpassed 20,636 units delivered, a genuine supply-demand inflection reinforced by Phoenix's structural growth drivers, including sustained in-migration and the nation's fourth-fastest population growth.

2 -The construction pipeline is contracting rapidly, down 29% year-over-year to 16,688 units, or 3.8% of inventory, while trailing 12-month starts have fallen even further to 9,153 units, setting up meaningfully lighter deliveries through 2027.

3 - Effective rents posted their first positive sequential quarter of the current cycle, and at 91.3%, Phoenix's occupancy is now the strongest among its Southwest peer markets, a sign the metro's underlying demand base is unusually resilient relative to other Sun Belt peers absorbing similar supply waves.

YOY OCCUPANCY CHANGE               -10 BASIS POINTS

ANNUAL RENT CHANGE -                   4.6%

OCCUPANCY RATE                               91.3%

Q2 2026 NET ABSORPTION                 21,910 T4Q

UNIT COMPLETIONS                             20,636 T4Q

DEMAND TRENDS – PHOENIX ABSORPTION STRONG!

Phoenix's multifamily market sustained robust leasing momentum in Q2 2026, with 6,145 units absorbed, slightly below the 6,550 units recorded in Q1 but well above long-term quarterly norms. Trailing 12-month net absorption reached 21,910 units, exceeding the 20,636 units delivered over the same period and marking one of the strongest demand stretches in the metro's history. Four consecutive quarters of positive absorption underscore the durability of renter demand, even as the market continues working through an elevated delivery cycle. The demand story is anchored by Phoenix's structural growth drivers rather than any single cyclical factor, including steady in-migration, relative affordability, and quality-of-life amenities that have made it one of the fastest-growing regions in the country. Those tailwinds have kept apartment leasing resilient, and as deliveries continue to moderate, the widening absorption advantage should provide a clearer path toward rent stabilization in coming quarters. Demand has been broad-based, with all 15 tracked submarkets posting positive trailing 12-month absorption. Southwest Valley led at 3,542 units, followed by East Valley at 2,510 units. Gilbert stood out with 1,721 units absorbed on a base of just 18,378 units, a standout pace that has helped push occupancy to a market-leading 93.8%. Downtown Phoenix absorbed 2,282 units, partially offsetting 3,762 units delivered but by an insufficient amount to improve its downward average rent trend.

Developers delivered 4,370 units in Q2 2026, bringing trailing 12-month completions to 20,636 units across Phoenix's 437,855-unit inventory. While still elevated, annual deliveries have declined from 22,998 units a year ago, confirming the market has moved past its supply peak. The construction pipeline stands at 16,688 units, or 3.8% of inventory, a 29% contraction from 23,670 units four quarters ago, a trajectory that points to meaningfully lighter delivery volumes by mid-2027. New project starts have pulled back substantially, with trailing 12-month starts declining to 9,153 units from 11,747 a year earlier, consistent with the broader normalization playing out across supply-heavy Sun Belt markets as construction activity resets to a more sustainable pace. With starts running well below the current delivery pace, the forward pipeline will continue shrinking, setting the stage for a period of reduced supply-side pressure that should benefit existing owners. Active construction is concentrated in a handful of submarkets. East Valley alone accounts for 4,413 units under construction, followed by North Phoenix (1,646 units), Tempe (1,481 units), and Deer Valley (1,401 units), collectively representing roughly 54% of the metro's pipeline. Performance diverges notably among high-delivery areas, with Tempe maintaining 92.2% occupancy despite 1,603 trailing 12-month completions, while Southeast Valley has compressed to 84.5% amid 1,188 deliveries.

CONSTRUCTION TRENDS

Developers delivered 4,370 units in Q2 2026, bringing trailing 12-month completions to 20,636 units across Phoenix's 437,855-unit inventory. While still elevated, annual deliveries have declined from 22,998 units a year ago, confirming the market has moved past its supply peak. The construction pipeline stands at 16,688 units, or 3.8% of inventory, a 29% contraction from 23,670 units four quarters ago, a trajectory that points to meaningfully lighter delivery volumes by mid-2027. New project starts have pulled back substantially, with trailing 12-month starts declining to 9,153 units from 11,747 a year earlier, consistent with the broader normalization playing out across supply-heavy Sun Belt markets as construction activity resets to a more sustainable pace. With starts running well below the current delivery pace, the forward pipeline will continue shrinking, setting the stage for a period of reduced supply-side pressure that should benefit existing owners. Active construction is concentrated in a handful of submarkets. East Valley alone accounts for 4,413 units under construction, followed by North Phoenix (1,646 units), Tempe (1,481 units), and Deer Valley (1,401 units), collectively representing roughly 54% of the metro's pipeline. Performance diverges notably among high-delivery areas, with Tempe maintaining 92.2% occupancy despite 1,603 trailing 12-month completions, while Southeast Valley has compressed to 84.5% amid 1,188 deliveries.

RENT TRENDS

Average effective rents in Phoenix stood at $1,440 per unit as of Q2 2026, reflecting a 4.6% year-over-year decline but a 0.1% quarter-over-quarter increase, the first positive sequential move in at least four quarters. The trajectory has steadily improved from -2.6% in Q3 2025 to marginally positive today, and while annual comparisons remain negative, the inflection suggests the worst of the correction is likely behind the market. Phoenix's annual decline compares reasonably well against its Southwest peer group, which as a whole is working through the same Sun Belt supply correction. Oklahoma City (-0.3%) and Houston (-2.3%) posted the mildest declines, followed by Dallas-Fort Worth and Austin, with Phoenix landing ahead of Las Vegas and San Antonio. That clustering points to a broader regional dynamic rather than any Phoenix-specific weakness, and the underlying trend is encouraging: with absorption now exceeding deliveries, the concession pressure that has weighed on pricing is easing meaningfully. Roughly 16,688 units remain under construction, but the pipeline is shrinking, and each passing quarter brings the market closer to full stabilization. Rent performance varies across the metro's 15 submarkets, with several areas already at or near stabilization. Old Town Scottsdale (-0.3%) and Camelback (-0.6%) are essentially flat and lead the market's recovery, reflecting minimal exposure to new supply. Southeast Valley (-10.4%) and West Maricopa County (-6.9%) still have the furthest to go, but their pressure is concentrated in a handful of high-delivery corridors rather than spread across the broader market, a sign that the correction is well contained and should continue narrowing as remaining supply is absorbed.