The Supply Correction Has a Date on It
First-quarter apartment starts fell to roughly 55,000 units nationally — the lowest quarterly figure since 2011 and about 73% below the early-2022 peak. Units under construction have been cut by more than half from the 2023 high. Completions are still elevated as the boom-era pipeline clears, but the math is now fixed: what wasn't started in 2024–25 can't deliver in 2027–28. Most forecasters see demand overtaking new supply by mid-2027.
Two Americas: The Midwest Held the Line
National averages hide a split market. Oversupplied Sun Belt metros are working through a genuine correction — Austin rents are down nearly 5% year-over-year, with Denver, Phoenix, Tampa, and San Antonio also negative — while Midwest and Northeast markets with restrained construction kept vacancy tight and rents growing. For capital screening new markets, the lesson of this cycle is that pipeline discipline, not headline job growth, determined who kept pricing power.
Renewals Are Quietly Carrying Revenue
Renewals now make up a historically high share of leasing activity — around 57% nationally — and renewal pricing has consistently outrun new-lease asking rents. Blended rent growth is positive even in some metros where asking rents remain negative. For underwriting, that argues for modeling renewal share and blended trade-outs explicitly rather than applying a single market asking-rent growth figure to the whole roll.
The Best Vintage of the Decade Is Being Underwritten Right Now
Development pencils worst at exactly the moment it will perform best. Deals underwritten in 2026 — against soft rents, cautious lenders, and pipeline data at 15-year lows — will deliver into 2028's supply vacuum. Discipline still matters — basis, submarket selection, and realistic exit caps — but waiting for fundamentals to confirm the turn means paying 2028 land prices for 2030 deliveries. The window is the uncomfortable part of the cycle. It usually is.
Stop Underwriting Yesterday's Exit Cap
Too many proformas still carry exit assumptions inherited from the 2021–22 transaction market. The next cycle's buyers will price off durable NOI and replacement cost, not momentum. With starts at generational lows and construction costs sticky, well-located assets in supply-disciplined markets are increasingly protected on basis. Underwrite the exit conservatively and let the supply math — not cap-rate hope — carry the return.
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