Apartment Supply Shock Recedes, But Recovery Still a Long Grind

CoStar's framework benchmarks the top 50 markets against its pre‑pandemic average delivery rate as a share of inventory, rather than applying a single national standard. A high‑growth metro with a long history of heavy construction is judged against that history; a slow‑growth market with a thin construction record is judged against a much lower bar.

"What's normal for one market would still be elevated in another," Montgomery explains, arguing that local delivery history and market size both matter in assessing when the shock has crested.

Against that backdrop, the map sorts markets into three broad buckets. Some, including Houston, Chicago, Seattle, San Francisco, Norfolk and Milwaukee, are already back below their historical delivery levels.

A larger group, including Dallas–Fort Worth and Nashville by the third quarter of 2026 and Austin and Raleigh by year‑end, is projected to normalize over the course of next year. This is a major shift given how outsized their supply growth was in the post‑pandemic chase for Sun Belt demand.

A smaller set, including Charlotte and Miami as well as Midwest markets such as Columbus, Indianapolis and Cincinnati, is expected to face elevated supply through 2028 or later.

Why some markets lag the turn

The laggards fall into two main categories in Montgomery's telling. First are metros whose supply peaks arrived later in the cycle, particularly in the Midwest. Those markets did not see the early post‑pandemic wave of development that targeted the Sun Belt, but strong rent performance eventually drew capital, pushing their construction peaks well behind those in faster‑moving southern metros.

As a result, markets such as Indianapolis, Columbus and Cincinnati do not get back to their pre‑pandemic average delivery pace until after 2028 in CoStar's outlook.

The second group consists of historically low‑construction markets where even moderate levels of new supply feel heavy relative to local norms. Some of these metros might have averaged deliveries of only 1.2% to 1.5% of inventory annually over the long term, Montgomery notes, but are now running "slightly above 2%."

Nationally, a 2% delivery rate would not stand out; in those markets, it is a meaningful shock. For investors accustomed to thinking in national terms, the analysis is a reminder that supply risk can look very different when scaled to local history.

The backlog that outlasts the boom

If the construction story is moving in the right direction for landlords, the leasing story is not yet there. Montgomery stresses that "normalization" in his study only tells investors when the supply shock stops intensifying; it does not mean the market is back in balance or that rent growth resumes immediately once deliveries return to historical norms. But the distinction matters because CoStar estimates that roughly 350,000 units nationwide still need to be leased in projects delivered over the last several years.

That backlog must be absorbed before the market can return to the national vacancy rate Montgomery describes as stabilized around 7%. He illustrates the point with Dallas–Fort Worth, a market where deliveries are projected to return to their pre‑pandemic average in the third quarter of 2026. In CoStar's forecast, positive rent growth in DFW does not appear until the first quarter of 2027 and does not move above 1% until the back half of that year. The reason: roughly 19,000 units in projects delivered in 2023, 2024 and 2025 still need to lease up to reach the current stabilized vacancy rate.

"Even as deliveries normalize, there can still be a meaningful lease‑up backlog," Montgomery says. That reality underpins much of the pushback he has seen on social media, where some local observers have argued that their markets feel further from recovery than CoStar's dates suggest.

In many cases, he suggests, those reactions reflect a misunderstanding of what the normalization dates actually represent. They mark the point at which the supply wave stops building; they do not claim that rent growth or occupancy metrics snap back at the same time.

From intensifying shock to stable planning

For operators and capital allocators, the primary value of the work is in drawing a clear line between markets where supply pressure is still intensifying and those where it is finally cresting. Even if rent growth takes time to return, Montgomery argues, knowing when the supply shock ends allows owners, lenders and developers to plan in a more stable and predictable environment.

Pricing, concessions and capital‑markets strategy can be calibrated differently in markets where the headwind is still getting stronger versus those where absorption is at least no longer falling further behind new deliveries.

The broader implication for investors is that the apartment cycle is now entering a more nuanced phase. The national construction wave is clearly receding, but the path back to balance will be uneven and often slow, governed as much by leftover lease‑up obligations as by forward starts.

In that environment, Montgomery's emphasis on local history, market‑specific timing and the separation of supply normalization from full recovery offers a framework for underwriting that looks beyond the comfort of a national average.