A Durable Economy Supports Long-Term Rental Demand in the South Bay, Peninsula and Alameda County
The U.S. economy keeps growing despite higher rates, high energy prices and weak consumer sentiment, and that growth supports long-term demand for apartments. GDP grew at an annualized 2.1% in the first quarter of 2026 and 1.5% in the second, and forecasters expect about 2% for the full year, in line with the long-term average. Economists put the odds of a recession in the next 12 months at roughly 25%, according to a September 2026 market update from market analysts.
Key takeaways
- Forecasters expect U.S. GDP to grow about 2% in 2026, with a 25% consensus chance of recession in the next year.
- Business spending on AI and data centers added an estimated 0.5 to 1 percentage point to GDP growth in recent quarters.
- Household debt as a share of income sits at its lowest level in more than 20 years, and inflation-adjusted savings reached a record high.
- Steady growth supports job creation and household formation, which drive rental demand in the South Bay, Peninsula and Alameda County.
How strong is the U.S. economy right now?
The headlines focus on oil and gas prices, inflation, the Fed's September rate hike, weak consumer sentiment and slow hiring. The underlying numbers look steadier. Retail sales have beaten expectations, even after adjusting for inflation, and GDP growth has stayed positive all year.
Business surveys point the same way. The ISM Manufacturing Index, which tracks the outlook of manufacturing companies, reads 55, near its highest level since 2022. The ISM Services Index also reads 55. Any reading above 50 signals growth. Corporate profits sit at a record high.
What is driving growth?
Business investment carries a large share of the load, led by spending on AI, data centers and the equipment and materials behind them. Analysts estimate that this investment added 50 to 100 basis points (0.5 to 1 percentage point) to GDP growth over the last few quarters. Without it, the economy would grow at about 1%, slower but still positive.
Households also look healthy in aggregate. Inflation-adjusted savings, including money market funds, reached a record high. Household debt as a share of income fell to its lowest level in more than 20 years, and real disposable income sits near record highs.
Those totals hide real differences. Higher-income households likely hold a large share of those savings, while middle- and lower-income households feel more strain, which helps explain the weak sentiment readings.
What this means for apartment owners
Rental demand follows jobs and household formation. An economy growing near its long-term average keeps both moving, even if hiring slows for a stretch. Market analysts expect demand for housing, along with industrial, retail and other property types, to keep growing over the long term.
Short-term pressure still matters. Higher borrowing costs affect refinancing and acquisitions, and some markets will feel the headwinds more than others. For a long-term owner, the GDP, business and household data above point to a sound economy underneath your building.
Owners who focus on operations stand to benefit most: keeping units leased, controlling expenses and making improvements that support rents. Those steps improve your income now and position the building well for a sale or refinance later.
What this means by region
South Bay
Santa Clara County's employer base leans heavily on technology, so the AI and data center spending lifting national growth runs straight through the local economy. Owners in San Jose, Santa Clara and Sunnyvale should watch tech hiring closely, since it moves local renter demand more than national averages do.
Peninsula
Peninsula renters tend to work in tech, finance and life sciences, and many hold above-average incomes. Strong household balance sheets at the top of the income range support rents at higher price points in cities like San Mateo, Redwood City and Palo Alto.
Alameda County
Alameda County draws renters from a wider range of industries, including logistics, health care, manufacturing and government. Cities like Hayward, San Leandro and Fremont also attract renters looking for more affordable options. That mix spreads the risk, though middle-income renters feel economic strain sooner.
Frequently asked questions
Is the U.S. economy heading into a recession in 2026?
Forecasters put the consensus odds of a recession in the next 12 months at about 25%, which is relatively low. GDP grew at 2.1% in the first quarter and 1.5% in the second, and the full-year forecast sits near 2%. Business investment and healthy household finances support that outlook.
How does the economy affect apartment demand?
Apartment demand follows job growth and household formation. When the economy grows, more people move out on their own, relocate for work or form new households, and most start as renters. Steady growth supports occupancy and rent over the long term.
Does AI investment help Bay Area apartment owners?
AI and data center spending added an estimated 0.5 to 1 percentage point to U.S. GDP growth in recent quarters. Santa Clara County's economy leans heavily on technology, so that spending supports local employers. Owners should still watch local tech hiring, since it drives renter demand more directly.
Should I hold or sell my multifamily property in 2026?
That depends on your loan terms, tax basis and goals. A durable economy supports long-term demand, which favors holding a well-run building. If your loan matures soon or your plans have changed, compare a sale against the cost of refinancing at current rates.
What to do next
Short-term headwinds deserve attention, but multifamily is a long-term investment. If you want to know what your building would sell for now, Request a valuation.
This post is for general information and doesn't constitute legal, tax or financial advice. Talk to your attorney, CPA or lender about how this applies to your property.
