Updated August 6, 2026
Last quarter I told you the interest-rate environment was the variable I wasn't going to forecast. It resolved — just not the way most of the buyer pool was underwriting for. The Fed held twice more since, and one of those meetings had three regional presidents pushing to raise rates, not cut them. That's the headline variable for Q3 2026, more than any single legislation date.
The RSO rewrite also landed on schedule July 1. What it actually produced was quieter than the run-up to it.
Here's what the numbers, the rate decisions, and my own closings this quarter say about where LA multifamily actually stands.
The rewritten Rent Stabilization Ordinance's new formula — 90% of CPI, with a 1% floor and 4% ceiling, replacing the old 100% CPI / 3% floor / 8% ceiling — started calculating July 1, 2026 as scheduled. LAHD has now published the actual rate for the RSO year running July 1, 2026 through June 30, 2027: 3%.
That's the same numeric increase pre-1978 LA City owners had under the prior transitional year. CPI landed the new formula almost exactly where the old formula's floor sat.
Two things worth separating here, because conflating them is the mistake I'm seeing in early buyer conversations:
The headline number didn't move much this cycle. If you were underwriting on the assumption that July 1 would produce a visibly smaller allowable increase than last year, it didn't — not this year.
The formula itself is structurally different, and that matters over a hold period, not a single year. The ceiling dropped from 8% to 4%. The utility reimbursement and dependent-occupant bumps that used to add real basis points are gone entirely. In a year where CPI runs hot — which is a live possibility given where inflation is sitting — the new formula caps out at half of what the old one could produce. The rewrite's teeth are in the tail risk, not the base case, and this year happened to land in the calm part of the range.
Buyers who are pricing this correctly are discounting for the ceiling, not the year-one number. Buyers who saw "3%, same as last year" and concluded the rewrite was overblown are underwriting the wrong risk.
Q2's open question was the rate environment. It's resolved, and the resolution runs against what most of the return-of-institutional-capital narrative was pricing in.
The Fed held the federal funds rate at 3.50%–3.75% at its June 17, 2026 meeting — Kevin Warsh's first meeting as chair, a 12–0 hold — and explicitly pulled back its earlier signal of a 2026 cut, pushing projected reductions into 2027 and 2028. It held again July 29, but that vote wasn't unanimous: three regional presidents dissented in favor of a hike, citing inflation that's now run above the Fed's 2% target for more than five years.
For LA multifamily, that changes the practical math for anyone modeling a 2026 refinance or acquisition against falling rates. It isn't happening this year on the current trajectory. Refinance-maturity sellers who were waiting for relief before listing are now looking at the same rate environment they've had since 2024, not an improving one. That's a real driver of continued seller volume into Q4 — not because owners want to sell, but because the "wait for rates to come down" plan has run out of runway for this year.
The full-year pattern so far is more volatile than a clean recovery story:
Read together, that's a market that's liquid but lumpy quarter to quarter — not a steady glide path. Don't anchor a listing decision to any single quarter's headline number; look at the trailing-year trend instead.
Pricing is where the sources disagree, and the disagreement is itself informative. Kidder Mathews puts Q2 2026's average sale price per unit at $280,591, up 3.3% year-over-year. NAI Capital puts it at $285,504 for the same quarter, down 12.9% from the prior quarter. Both can be true — different transaction mixes, different sample sizes, and a market where per-unit pricing genuinely varies by tens of thousands of dollars depending on submarket and vintage. CBRE's broader read puts the current market average closer to $300,000 per unit, roughly 25% below the 2022 peak. The honest takeaway: aggregate per-unit averages move around by data provider more than they used to, which means your building's actual comps matter more than any single headline figure.
One real data point on where the top of the market is trading: Prime Residential's June 2026 acquisition of a 132-unit Miracle Mile complex closed at $51.3 million — $388,000 per unit, well above the market averages above, on a well-located, well-maintained asset. That's the kind of number a generic market report can't tell you applies to your building; it's the kind of number a submarket-specific comp read can.
Buyer composition confirms what I'm seeing on the ground: private investors closed roughly 66% of multifamily sales volume this stretch, not the institutional funds. NAI Capital's segment data backs this up — the $1M-$5M (Class C) tier saw real growth, and the $5.5M-$10.6M range saw units sold jump 41% year-over-year. The $10M+ segment grew fastest of all last quarter, which tells you both ends of the market are active; it's the middle that's comparatively quiet.
Sales above the Measure ULA threshold remain down roughly 50% from pre-measure averages, per Marcus & Millichap. That's consistent with what I've written in past updates — ULA continues to push $5M+ transaction volume toward structuring around the threshold, timing around the annual inflation adjustment, or moving to LA-adjacent jurisdictions entirely. The threshold itself adjusts every July 1 for inflation; if your building is anywhere near the line, verify the current exact dollar figure and tax rate against LA Office of Finance documentation before finalizing a net-proceeds model — don't work from last year's number.
Per Kidder Mathews' Q2 2026 reporting:
Marcus & Millichap's separate 2026 forecast puts full-year deliveries at roughly 8,500 units with rent growth around 1% — a different methodology than Yardi Matrix's April estimate (~11,000 deliveries), but directionally the same story both sources tell: construction starts collapsed after 2023, and the pipeline behind this year's deliveries keeps shrinking. That supports rent growth and pricing on the post-1995 side over a multi-year horizon, even in a quarter where absorption and deliveries are both modest.
Vacancy and rents, Q2 2026 (Kidder Mathews): vacancy sits at 5.5%, up 50 basis points year-over-year. Average asking rent across all unit types is $2,310/month. The vacancy uptick and the still-elevated deliveries in specific submarkets — Warner Center, Playa Vista, Downtown LA, pockets of Hollywood — are the same near-term moderating factors I flagged last quarter, and they haven't resolved yet.
Seven of my own closings landed since April: two in Palms, three scattered across LA, one in Sherman Oaks, one in Hollywood, and one in Pasadena in mid-July — $24.9 million combined, 90 units. Every one of them was a private buyer, not an institutional fund, which tracks exactly with the 66% private-investor share the broader data shows. None were above the ULA threshold. That's not a coincidence — it's the same threshold-avoidance pattern showing up in my own pipeline that the aggregate data shows market-wide.
Pre-1978 LA City — now trading against live post-rewrite underwriting rather than anticipated underwriting. The 3% actual increase this cycle gives sellers a real argument that the rewrite's near-term bite is smaller than buyers feared in Q1-Q2; the ceiling argument still belongs to the buyer for any hold period assumption beyond this year.
Post-1995 LA City — the bidding environment I described last quarter as the strongest in three years is holding, and the "no rate relief this year" reality strengthens the case for selling now rather than waiting for a rate-driven cap-rate improvement that isn't coming in 2026.
Sherman Oaks and the Valley generally — steady private-buyer activity, consistent with my own closing there this quarter. Local operators and family offices remain the dominant pool.
Pasadena and LA-adjacent cities — no RSO-rewrite exposure, stable pricing, and continued 1031 inflow from LA City sellers exiting RSO-covered inventory. My Pasadena closing this quarter fits that pattern directly.
Pre-1978 LA City owners: The "wait and see what the rewrite actually does" period is over — you now have a real data point. Use it. A 3% actual increase this cycle is a genuinely useful number in a listing conversation; it's a materially better story than the worst-case buyers were pricing into offers in Q1.
Post-1995 LA City owners: Institutional bidding is strong and the rate environment isn't improving this year. If a sale makes sense for your situation, there's no rate-driven reason to wait for 2027.
Owners near the ULA threshold: Get the current exact threshold and rate before modeling net proceeds — it moved again this July, and using last year's figure will misprice your outcome.
Everyone refinancing in the next 12 months: Plan around the current rate environment persisting through 2026. The Fed's own dissent in July was toward higher, not lower.
If the pattern holds: transaction volume stays choppy quarter to quarter but the trailing-year trend remains positive. Pre-1978 pricing should finish absorbing the rewrite's real (not feared) impact by year-end, and the "actual 3% cycle" becomes the new baseline comparable for underwriting rather than the pre-rewrite formula. Post-1995 pricing continues its multi-year premium widening, supported by the contracting supply pipeline more than by any near-term rate relief. Rate cuts, on the Fed's own current signaling, are a 2027-2028 story, not a Q4 2026 one — sellers and buyers underwriting a 2026 rate-relief scenario are underwriting against the Fed's own stated path.
This report draws on publicly available market data from Kidder Mathews, NAI Capital, CBRE, Colliers, and Marcus & Millichap Q2 2026 reporting, plus CNBC's coverage of the Federal Reserve's June 17 and July 29, 2026 FOMC decisions. Regulatory detail draws on current LAHD RSO documentation and legal analysis of the July 2026 Measure ULA inflation adjustment. Michael Sterman's commentary draws on transaction activity within the Sterman Multifamily Group's operating markets through Q2-Q3 2026.
All specific dollar figures reference the source reports. Sterman Multifamily Group does not invent or interpolate specific market statistics.
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Michael Sterman is Senior Managing Director Investments at Marcus & Millichap. He operates across all core LA submarkets and specializes in seller representation for private clients. This quarterly market update will next publish in October 2026 covering Q4.
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