Orange County Multifamily: Where the Market Stands Heading into 2026

By Jimmy Leach & Anthony Annunziata Strands Realty Group December 17th, 2025

Now that we are closing out 2025, it is a good time to step back and ask a simple question: what actually happened in Orange County multifamily this year, and what does it mean for 2026 if you own, operate, or invest in apartments in Orange County?

If 2025 had a theme, it was this: operations stayed strong, but transactions depended on financing, lender sizing, and seller expectations. Orange County remains one of the tightest apartment markets in Southern California; the challenge has been getting deals to pencil in a higher cost of capital environment.

2025 in one picture: tight fundamentals, selective capital

On the operating side, Orange County remained exceptionally tight through Q3. CBRE reported Orange County multifamily occupancy at 96.4% at the end of Q3 2025. Average rent ended Q3 at $2,936 per unit, up 1.1% from Q2. CBRE also noted net absorption of 290units and just 408 units delivered in the quarter.

On the transaction side, CBRE reported Orange County multifamily investment sales volume at $250 million in Q3 2025, down from $551.4 million in Q2, with slower debt funding and elevated costs of capital weighing on execution.

That is the 2025 story in plain terms: fundamentals continued to do their job, but the capital stack did not get easier.

Why the national picture mattered

Orange County’s performance makes more sense when you put it next to the national backdrop.

CBRE reported that U.S. multifamily vacancy rose to 4.4% in Q3 2025, while year-over-year effective rent growth slowed to 0.5%. Net absorption fell to 43,200 units, the weakest Q3 absorption since 2022.

Operators also leaned harder on concessions in many markets. RealPage reported that in November 2025, 16% of stabilized apartments offered concessions, with an average discount of 10.2%. RealPage also notes concession prevalence and discounting were skewed heavier in the South, with the West Coast still showing meaningful levels.

Orange County is not a concession-driven market in the same way as many high-supply metros, but national trends still matter because they influence lender sentiment, buyer underwriting posture, and where capital is choosing to take risk.

Operating fundamentals in Orange County: durable, not euphoric

Orange County continues to behave like a supply-constrained market: high occupancy, limited deliveries, and rent growth that is positive but not runaway.

The practical takeaway for 2026 underwriting is straightforward. Assume disciplined rent growth and stable operations, not a snap-back or boom scenario. Orange County’s edge remains structural, not cyclical.

Cap rates, values, and deal flow: pricing is set by finance ability

In 2026, pricing will be set by execution and finance ability, not just the Orange County premium.

2025 showed how quickly volume can fall when the bid-ask gap widens. The quarter-to-quarter sales volume decline reported by CBRE is less about demand disappearing and more about deals failing to clear the capital markets at prior pricing.

This is why the best trades in the current environment tend to share the same DNA: clean financials, a credible plan, and a price that matches where lenders are sizing proceeds today.

Debt and supply: why the 2026 timing window matters

Two shifts are setting up 2026.

First, the supply cycle is bending. CoStar flagged a near-term inflection: in Q4 2025, renters are expected to occupy more units than are added to supply, the first time since Q3 2021. CoStar’s framing is that this should allow vacancy to begin receding in 2026 as the construction pipeline shrinks.

Second, the rate environment is gradually easing. On December 10, 2025, the Federal Reserve reduced the target range for the federal funds rate by 0.25% to 3.50% to 3.75%.

At the same time, agency liquidity has supportive guardrails for 2026. FHFA set 2026 multifamily loan purchase caps at $88 billion each for Fannie Mae and Freddie Mac (combined $176 billion) and requires at least 50% of each Enterprise’s multifamily volume to be mission-driven and affordable.

None of this means financing becomes easy. It does mean the market is moving from pure pressure to a more workable setup, where debt terms and execution can improve at the margin and deal velocity can follow.

Orange County through 2026: what local forecasting implies

USC Lusk’s Casden forecast reinforces the core Orange County thesis: undersupplied, expensive, and supported by long-term fundamentals, but still expected to show only moderate rent growth.

USC Lusk reporting on the Casden forecast cites Orange County’s July 2024 average rent at $2,653 with a 4.02% vacancy rate, moving to a July 2026 forecast rent of $2,786 with a 4.59% vacancy rate, and a projected rent increase of 2.34% per year.

Read simply: Orange County remains structurally strong, but underwriting should stay realistic on growth and assume the market has to earn each basis point.

What this means for sellers

In 2026, pricing will be set by execution and finance ability, not just the Orange County premium.

Sellers who achieve the best outcomes will typically:

• Present clean financials and a coherent operating story. That means accurate rent rolls, demonstrated collections, and transparent, supportable operating expenses.

• Prove upside with evidence. Show loss-to-lease supported by current comps, documented unit renovation premiums, and credible expense normalization, not just a story.

• Price to the debt reality while defending a rational OC premium. Align expectations with where lenders are sizing proceeds and where buyers’ cost of capital lands today.

If your process is built around these three items, you will attract the buyer pool that can actually close, not just the buyer pool that can talk.

What this means for buyers

Two types of deals should be most actionable in 2026:

• Stabilized assets that pencil today. These continue to trade even in choppy markets because execution risk is low and financing is straightforward.

• Selective value-add with near-term, provable NOI lift. Business plans that require multiple years of perfect execution or aggressive rent assumptions are being discounted.

In practice, the best opportunities tend to appear when a seller’s timing, loan maturity, or partnership dynamics create real motivation, and the underlying asset still offers durable Orange County fundamentals.

Five things to watch in Q1 2026

• Effective rents versus asking rents, especially in submarkets where concessions begin to creep in and influence underwriting posture.

• Net absorption versus deliveries as the recent supply wave starts to roll off and the pipeline moderates.

• The spread between in-place cap rates and all-in cost of debt, and how that spread dictates lender proceeds and debt yields.

• Where agency liquidity is most available and how pricing differs between agency, bank, and debt fund executions.

• Bid-ask alignment between buyers and sellers, which remains the single biggest determinant of whether deals actually trade.

Bottom line and next steps

Orange County multifamily fundamentals held up in 2025, but transactions required tighter pricing discipline and clearer financing stories to close. Heading into 2026, the macro backdrop is improving at the margin, yet buyers will remain selective, and deals will be won on preparation, execution, and realistic underwriting.

Wishing your families a Merry Christmas and happy holidays and looking forward to working together in 2026.