The Sun Belt Apartment Glut Is Finally Starting to Fade
Xander Snyder is principal commercial real estate economist at First American.
For the past several years, the multifamily market has been moving through a historic wave of new apartment construction. This new supply, which has been especially concentrated in a number of Sun Belt cities, has given renters more choices, pushed vacancy rates higher, and forced property managers to compete by lowering rents or offering concessions, in some cases several months of free rent.
That supply wave is still being absorbed, especially in the most heavily affected markets. But the balance between supply and demand is shifting. In several Sun Belt markets with significant recent deliveries, renters are now leasing apartments faster than developers are delivering them, a notable change from recent years. Although rents are still falling in many of these markets, the first stage of rebalancing appears to be underway.
Rebalancing Underway
The animated chart here shows how this process is unfolding and where it is most prevalent. It plots annual rent growth on the vertical axis against “new excess stock” on the horizontal axis and tracks how that relationship changed from the first quarter of 2023 through the second quarter of 2026. The animation begins as the expanding post-pandemic construction pipeline was starting to produce substantial apartment deliveries and slower rent growth.
New excess stock combines net absorption, a measure of demand, with net deliveries, a measure of supply. Net absorption is the change in the number of occupied apartments from one period to another. In simple terms, apartments leased minus apartments vacated. Net deliveries represent the number of newly completed units added to inventory, net of demolitions.
There is an intuitive relationship between these measures. When new excess stock falls, absorption is outpacing deliveries, vacancies tend to decline, and landlords begin to regain pricing power. When new excess stock rises, deliveries are outpacing absorption. Renters have more alternatives, and landlords face greater pressure to reduce rents or offer concessions to fill vacancies.
That relationship was particularly clear in the first quarter of 2024, when the post-pandemic construction surge was in full swing and put downward pressure on apartment rents. Cities with the largest increases in new excess stock generally had the weakest rent growth.
More recently, however, this relationship has weakened. In the animation, the fitted line summarizing the relationship between the two measures becomes flatter over time, while the observations around it become more dispersed. This does not mean that supply and demand have stopped influencing rents. Rather, it suggests that markets are at different stages of the adjustment process, and that annual rent growth is a lagging indicator of improvements already appearing in supply-and-demand flows.
Following the Sun Belt’s Path
The trails attached to selected Sun Belt cities help illustrate this transition. At the height of the delivery wave, many of these cities moved into the chart’s lower-right quadrant as excess supply translated into rent declines. More recently, several have begun moving toward the lower-left quadrant, where absorption exceeds new deliveries, even though annual rent growth remains negative. This movement suggests that renters are gradually leasing up the supply overhang, although landlords have not yet recovered much pricing power.
In a sense, the oversupply in several Sun Belt markets was a consequence of their own popularity. Sun Belt cities attracted households during the pandemic by offering more space and, in many cases, greater affordability, especially compared to coastal markets. Strong migration, rapidly rising rents, and extremely cheap financing resulted in a construction surge.
Much, though not all, of that construction has now been delivered. As a result, renters have more options, while property managers and owners are facing unusually intense competition. The remaining supply overhang is meaningful, and owners generally prefer to lease a unit with concessions, rather than leave it vacant and generate no income. As this excess supply is absorbed, rent growth could remain soft through 2027.
However, these supply waves were often largest in cities that were, and remain, attractive places to live. Absorption has remained strong in many heavily supplied markets, even as construction has slowed. If that demand continues, more of the existing inventory will gradually lease up, and rent growth should eventually turn positive. That adjustment need not happen quickly. Movement into the lower-left quadrant is an early sign that demand is beginning to exceed supply, even though rents have not yet recovered. The Sun Belt is not back in balance yet, but it is moving from oversupplied to occupied.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
