In early February, several of the largest apartment REITs in the country signaled a striking shift in capital allocation. Camden Property Trust is marketing eleven properties valued at roughly $1.5 billion. UDR is actively marketing $700 million in properties and expects to be a net seller throughout 2026. And Equity Residential repurchased $206 million of its own stock in Q4 while pausing acquisitions entirely—with CEO Mark Parrell declaring that “the best capital allocation opportunity we see now is to sell properties… and use the sales proceeds to buy back our stock.”

These are among the strongest operators in the sector—well-capitalized, professionally managed, sitting on portfolios with improving fundamentals. So why are they selling assets and buying back their own shares instead of expanding?

The answer reveals something important about the difference between owning real estate through a REIT and owning it directly: when you buy shares in an apartment REIT, you’re not really investing in real estate. You’re investing in Wall Street’s opinion of real estate. And right now, that opinion is at generational lows.

The Thirty-Year Low

The sentiment numbers are stark. Entering fourth-quarter earnings season, Piper Sandler’s Alexander Goldfarb observed that apartment investor sentiment had crashed to levels not seen in three decades. “Whereas apartments used to be the ‘safe’ sector for investors, 2025 upended that view with sentiment heading into 4Q25 earnings about the sourest we’ve seen in our three decades in REITland,” he wrote in a research note.

That sentiment has real consequences. According to Green Street analysis from November, apartment REITs are trading at discounts of 15% or greater to their net asset values. The gap between public and private valuations has become so pronounced that Nareit’s 2026 Outlook notes the divergence “now rivals gaps last seen during the global financial crisis and early pandemic era.”

The same buildings, owned by the same management teams, are worth materially less when wrapped in a publicly traded structure than they would be in private hands.

Meanwhile, the Fundamentals

Here’s what makes the sentiment collapse so striking: the underlying apartment market is actually improving.

New supply has fallen dramatically. Deliveries are down more than 60% from their recent peak in many major markets. The construction pipeline has contracted to roughly 50% below its cycle peak, with starts at their lowest levels in over a decade. The supply wave that pressured fundamentals for three years is now receding rapidly.

Demand remains strong. Full-year 2025 absorption totaled 355,000 units—the third-strongest year for apartment demand in the past quarter century. Renters are renewing their leases at historically high levels, with renewals comprising 57% of all leasing activity. People aren’t leaving; they’re staying and paying.

Affordability remains favorable. Camden’s Q4 earnings data shows its residents spend just 19% of income on rent—well below historical stress thresholds and providing meaningful cushion for continued rent growth as the market normalizes.

Transaction activity is accelerating. Apartment sales volume reached $165.5 billion in 2025, up 9% year-over-year, with multifamily commanding the largest share of commercial real estate investment for the year. Private capital is actively deploying into the sector.

Supply falling. Demand strong. Private capital buying. And yet REIT shares trade at 30-year sentiment lows. The disconnect isn’t about the real estate. It’s about the wrapper.

What REITs Actually Offer

Before going further, it’s worth acknowledging what apartment REITs do well—because this isn’t a hit piece on public ownership.

REITs solve a real problem: they remove the sponsor-vetting challenge entirely. When you invest in a publicly traded REIT, you get liquidity, fiduciary oversight, audited financials, and professional management operating under securities law disclosure requirements. You’re protected from the nightmares that can come from backing a bad sponsor—the kind who overleverages, mismanages, or disappears when things get difficult. I’ve seen what happens when investors back the wrong operator, and that protection is genuinely valuable.

For investors who don’t have the ability or inclination to evaluate private sponsors, REITs democratized access to institutional-quality real estate in a way that didn’t exist before. The structure works.

But that structure comes with costs that become especially visible in moments like this one.

The Sentiment Tax

The trade-off embedded in REIT ownership is straightforward: you accept reduced returns in strong markets in exchange for liquidity and protection from sponsor risk.

That trade-off shows up in several ways. REITs carry meaningful administrative burdens—the costs of being a public company, maintaining analyst coverage, satisfying quarterly earnings expectations. Those costs reduce what ultimately flows to shareholders. And because REIT distributions are taxed as ordinary income rather than benefiting from the preferential treatment available to direct real estate owners, the after-tax return profile looks different as well.

But the most significant cost is the sentiment tax: REIT prices reflect not just the value of underlying real estate, but also market psychology about the sector, interest rate expectations, flows in and out of real estate funds, and the general mood of institutional investors who may be making allocation decisions based on factors that have nothing to do with apartment fundamentals.

When sentiment turns negative—as it has now—REIT shares can trade at substantial discounts to the value of the buildings they own. The same asset that would transact at one price in the private market gets marked down in the public market because of forces entirely disconnected from rents collected, occupancy maintained, or NOI generated. I’ve watched investors sell quality positions at exactly the wrong moment because their brokerage statement told them they’d lost 20%—even though the underlying buildings were performing fine.

You’re not getting marked to market on the real estate. You’re getting marked to market on Wall Street’s feelings about real estate.

The Private Alternative

Direct ownership of real estate—whether through a private sponsor or direct investment—operates differently.

There’s no daily mark-to-market. The value of your investment isn’t recalculated every time a hedge fund rebalances or an analyst adjusts a price target. You own the asset. You collect the rent. Your returns compound based on operational performance, not sentiment swings.

The tax treatment is more favorable. Depreciation flows through to investors, offsetting taxable income during the hold period. 1031 exchanges allow capital to move between properties without triggering gains, keeping more money working rather than going to the IRS. Over a multi-decade investment horizon, these structural advantages compound significantly.

Perhaps most importantly, private ownership allows for patient decision-making. Public REITs face constant pressure to meet quarterly earnings expectations, manage analyst relationships, and maintain dividend coverage ratios. Private sponsors with conservative capital structures can hold through market volatility, make operational improvements on their own timeline, and exit when conditions are favorable rather than when the calendar demands it. That patience—the ability to be greedy when others are fearful and to sell a year early rather than a day too late—creates returns that quarterly-focused structures cannot replicate.

The catch, of course, is that private ownership requires finding a sponsor worth trusting. The same structure that removes the sentiment tax also removes the protections that public markets provide. If you choose the wrong partner, you’re exposed in ways that REIT investors never are.

The Real Question

This brings us to the essential decision: can you find a sponsor worth trusting?

It’s not a trivial question. The same market conditions creating opportunity for well-positioned operators are also creating pressure for those who need rescue capital. We wrote recently about the inflection trap facing multifamily investors in 2026—the challenge of distinguishing between sponsors positioned to capitalize on current opportunities and those seeking fresh equity to solve problems created by aggressive decisions made years ago. That piece outlines specific questions investors should ask: What was this sponsor doing in 2021-2022? What does their existing portfolio reveal about their actual decision-making discipline? How did they structure debt, and are they facing maturity pressures that might compromise their judgment today?

These questions matter precisely because private ownership doesn’t come with the backstops that public ownership provides. You’re trading away protection for potential—and that trade only works if you get the sponsor selection right.

For investors who can’t or won’t do that work, REITs remain a reasonable choice. The protection has value. The liquidity has value. Accepting somewhat lower returns for that certainty is a defensible decision.

But for investors who can identify quality sponsors, the current environment presents something unusual: a moment when the gap between public and private valuations is as wide as it’s been in decades.

Why This Moment Matters

The divergence between public and private real estate valuations tends to be widest when sentiment is worst. That’s exactly where we are now.

REIT shares price in pessimism about rate trajectories, concerns about economic uncertainty, worries about remaining supply in certain markets. Private transactions price in the asset: what it generates today, what it’s likely to generate over a hold period, what the exit environment might look like in five or seven years.

Those two frameworks can reach very different conclusions about the same buildings.

When sophisticated REIT operators recognize this valuation disconnect, they respond in predictable ways: selling assets into private hands at prices above what their stock implies, buying back their own shares at discounts to NAV, pausing acquisitions that would be dilutive at current prices. Camden, UDR, and Equity Residential are all executing some combination of these moves—not because they’ve lost faith in apartments, but because they’re arbitraging the gap between sentiment and reality.

As Seth Laughlin, Head of Real Estate Strategy at Cohen & Steers, recently observed: “Apartments sit at the other end of the spectrum, with discounts to NAV restricting their ability to grow, and are more likely to sell in this market. The private market is much more optimistic on apartment fundamentals and is willing to pay.”

That optimism isn’t speculative—it’s grounded in the actual performance metrics we’ve outlined: falling supply, strong absorption, healthy rent-to-income ratios. The private market is pricing real estate based on what it does. The public market is pricing it based on how investors feel about the sector.

Private investors have the opportunity to be on the other side of that trade—to acquire quality assets at valuations that reflect sentiment depression rather than fundamental deterioration. At PEM, we’ve navigated five market cycles with this same disciplined approach—surviving three and thriving through the last two, including our expansion from one state to fourteen states during the Great Financial Crisis. The current environment rewards that discipline the same way it always has: moments when operators with conservative capital structures can acquire assets from motivated sellers while others remain paralyzed by uncertainty.

The institutions, as is often the case, will likely arrive late. By the time sentiment normalizes and REIT prices recover, the most attractive private opportunities will have transacted. The window for buying quality assets at dislocated bases tends to close before the data confirms it was ever open.

Owning the Asset

The buildings will keep producing. Rents will be collected. Value will compound. The only questions are how you own it — and whether you got in when prices reflected the fundamentals or the sentiment.

Both approaches have merit. Both involve trade-offs. The right answer depends on your ability to evaluate sponsors, your liquidity requirements, your time horizon, and your tolerance for the work required to identify quality private opportunities.

What shouldn’t factor into the decision is the assumption that current REIT prices reflect some fundamental truth about apartment values. They don’t. They reflect sentiment—sentiment that has reached generational lows even as the underlying fundamentals continue to improve.

The real question isn’t public versus private. It’s whether you understand what you’re actually owning—and whether the structure you choose aligns with how you think about building wealth over time.

The buildings don’t know the difference. But thirty years of compounding will.

About the Author

Paul Mashni is the Founder and CEO of Professional Equity Management (PEM), a vertically integrated real estate investment firm specializing in multifamily properties. With over 30 years of experience and more than 26,000 apartment units acquired, Paul has navigated multiple market cycles while maintaining an average IRR exceeding 20% since inception. His investment philosophy is guided by the principle that it’s “better to sell a year too early than a day too late.” Paul holds a Bachelor of Science in Accounting and an MBA in Finance from Michigan State University, along with a law degree from Wayne State University.