Jim Schloemer
Chief Executive Officer
Although 2025 is now in the rearview mirror, the uncertain and sometimes volatile economic and geopolitical conditions experienced last year are likely to persist throughout this year, reminding us how unpredictable developments can influence investment results in the near term. Against that backdrop, the apartment industry is navigating the aftereffects of an unprecedented wave of new supply and a rapidly changing capital markets environment.
At this year’s Annual Meeting of the National Multifamily Housing Council (NMHC), a speaker noted that “more wealth has been created in real estate in the inflection of cycles than during normal or even robust market conditions.” We believe that apartment investment is currently at an inflection point. Our perspective is informed by extensive industry research and active engagement with leading apartment market data providers such as RealPage, Yardi, and John Burns Real Estate Consulting, as well as organizations such as Multifamily Executive and NMHC.
Let’s start by reviewing market conditions over the past few years. After a massive spike in apartment rents post-pandemic, the apartment market entered a period of more challenging fundamentals, primarily due to a significant wave of new supply driven by two years of significantly high construction starts. While we expected a challenging period for apartment rent growth and occupancy, the extent of these challenges exceeded our expectations and those of nearly every apartment professional and market analyst.
The multifamily market hasn’t experienced this level of new supply since the mid-1980s. Approximately 1.42 million new apartment homes were completed between 2023 and 2025. Completions peaked in 2024 at 584,000 units, which is 92% higher than the five-year pre-pandemic average of 303,000 units. Now, the pendulum is swinging in the opposite direction, with projected deliveries in 2026 of only 316,000 units, a 46% decrease from 2024, and nearly matching the pre-pandemic average.
Fortunately for apartment investments, despite the elevated supply, the U.S. economy has generated consistent demand for housing, and the relative lack of affordability of single-family homes has channeled much of this demand into rental housing. Throughout this period of significant new apartment completions, many property managers emphasized occupancy over rent growth by utilizing rent discounts and concessions such as free rent to attract new residents and retain existing residents.
The oversupply conditions, especially across Sun Belt markets, pushed national rent growth down from a positive 0.4% at the end of 2024 to -0.6% in 2025, according to RealPage. The geographic variance in rent growth was even more dramatic, with markets like Phoenix, Denver, and Austin experiencing more significant declines in rent. Compounding the impact of little or negative revenue growth, inflation drove expenses higher, particularly for insurance and taxes, which caused net operating income (NOI) growth to turn negative in many markets.
After this wave of deliveries, development activity began to moderate. After peaking in mid-2022 at 580,000 units, apartment starts (approximately two years ahead of completions) have been trending downward and totaled only 260,000 units during 2025.
In addition, units under construction have declined 50% from their early 2023 peak of 1.1 million units to just 534,000 units at the end of 2025. These declines reflect a significant pullback in the availability of construction debt and institutional equity investment due to market conditions and returns. While the pace of deliveries over the past couple of years was largely expected based on permit and start data, the time required to absorb this inventory has been longer than many anticipated. As completions normalize in 2026 and demand remains stable, national rent growth should turn positive by the end of the year and settle near 3% annually in 2027 and 2028.
As the pipeline of new apartment development has slowed dramatically due to the market’s lack of capital, apartment deliveries will be constricted in 2027 and 2028, just when today’s supply will be fully absorbed.
Increasing revenue, coupled with cooling operating expense inflation and construction costs, points toward a much different outlook for newly completed and stabilized apartment properties in 2027 and 2028. Even if interest rates remain “higher for longer,” the value of portfolios should increase due to higher operating income.
The U.S. continues to face a shortage of housing, with some estimates approaching a gap of 5 million units. Due to multiple issues in the for-sale housing market, demand is weighted more heavily toward rental housing than has historically occurred. Workforce-attainable rentals have particularly benefited from the affordability challenge.
These dynamics reinforce the long-term fundamentals supporting rental housing. While the industry has worked through a period of elevated supply and higher costs, slowing development activity and sustained demand should lead to a more balanced supply environment in the years ahead.
About Continental Properties
Continental Properties is a National Multifamily Housing Council Top 10 developer, owner, and operator of rental home communities, retail, and hospitality properties. Since its inception in 1979, the company has developed 137 apartment communities, encompassing over 37,000 apartment homes across 20 states. In addition to its development portfolio, Continental Properties has strategically acquired nine apartment communities, further expanding its national footprint.
