Sector Spotlight: Key Trends Shaping Residential Real Estate in 2026

Despite a recent slowdown in rent growth, we believe the U.S. residential sector continues to be anchored by durable demand fundamentals, with demographic momentum, affordability pressures, and domestic migration realignments all reinforcing the need for rental housing. 

Three trends stand out to us as the potential drivers of demand: who today’s renters are, why renting remains the more attainable option for many households, and which markets are capturing the strongest migration inflows. 

Demographics: Renter Cohorts Driving Demand

Today’s renter base is being powered by the two largest generations, Gen Z and Millennials, whose scale and household‑formation patterns may create sustained upward pressure on rental demand nationwide.

Gen Z: The Emerging Renter Market

• Represents approximately 71 million Americans[1]
• Delayed household-formation due to high student debt levels of ~$30,000[2]
• We see a cohort of Gen Z preferring the flexibility, amenities, and cost structure of renting

Millennials: The Core Renter Population

• Nearly 74 million Americans, of which approximately 45% still rent[3]
• Homeownership at age 30 is just 33% vs. 42% for Gen X[4]
• We believe a cohort of high-income renters by choice has been a driver in Class A multifamily and BTR demand

Generational Homeownership Rates[4]

Immigration’s Growing Role

• Immigrant households represent 21% of all renters[5]
• Net international migration surged to 2.7 million in 2024 before normalizing to 1.3 million in 2025, above pre-pandemic levels[6]

Affordability: Why We Believe Renting May Win in 2026

In our opinion, affordability remains one of the most powerful structural forces driving household preference toward renting. The gap between renting and owning reached historic levels amid rising interest rates in 2022 with many renters unable to make the jump to homeownership during that time.

Homeownership Costs Have Soared

• A 20% down mortgage on a $400,000 home became nearly 80% more expensive, resulting in monthly payments increasing from $1,300 to $2,300.[7]
• Homeownership costs as a share of income jumped from 28% in 2020 to 45% in 2024 and remain elevated at 43% in late 2025, well above HUD’s 30% affordability threshold.[8]
• More than half of U.S. mortgages have interest rates below 4% keeping current homeowners from selling as a new mortgage rates would increase to roughly 6%.[9]

Renting Is Sometimes 100+% Cheaper Than Owning

In many markets, the cost of owning is now more than double the cost of renting, creating a significant monthly payment gap that may strengthen rental demand and keep retention high as would‑be buyers remain priced out.

Monthly Rent vs Own Cost by Market[10]

Amid ongoing economic headwinds, it is our view that the residential sector’s core strengths of demographic demand, structural affordability pressures, and migration flows will remain intact. With these trends providing anticipated long-term tailwinds, we believe the sector is positioned for potential rent stabilization and a gradual recovery through 2026-2027, led by the metros benefiting most from the demographic and migration tailwinds discussed above.