Deepest Apartment Discounts Hit Peak, But Burn-Off Will Be Slow

Montgomery characterizes 2026 as a stabilization year rather than a full reset: vacancy should drift lower as the pipeline thins, but he does not expect a V‑shaped recovery in pricing power. He sees concessions starting to burn off more steadily toward the end of this year, with a more notable unwind in 2027 as the second leg of the supply decline works through the system.

Breadth, Depth and the Sun Belt Standouts

By Montgomery's account, both the breadth and depth of current concessions are unmatched in his career. Apartments.com data shows that 41.2% of multifamily properties nationwide are now offering concessions, up nearly 10 percentage points year-over-year.

In high‑supply markets, the dominant tactic is not cutting sticker rents but advertising 1–2 months free, often layered with smaller incentives that do not make it into listings.

The Sun Belt is where the trend is most concentrated. In Sarasota, 81.8% of properties are offering concessions, and nearly half are advertising two months free—among the most aggressive discounting in the country.

Charlotte has seen its share of properties with concessions jump to 51.2%, a 13.8‑point increase in just a year, while roughly 6.8% of its inventory remains under construction.

Austin, now the 12th‑largest city in the U.S., has about 700 properties using concessions; more than 60% of them are offering one to two months free, even as 4.9% of the market's inventory remains in the pipeline.

San Antonio posted the highest vacancy rate among the 50 largest U.S. metros in March and Phoenix—despite strong economic fundamentals—continues to wrestle with elevated vacancies and widespread giveaways as it digests its own building boom.

For investors, the message is that published asking rents and headline rent‑growth figures are understating the real hit to revenue in these metros. Concessions are preserving nominal rent levels on paper while pushing effective rents meaningfully lower, with the gap widest in markets where the construction surge collided with slowing absorption.

What Fades First

Within that broad landscape, Montgomery expects the deepest offers to be the first to disappear once fundamentals give owners room to pull back. In Austin, for example, roughly 15% of units are offering three months free—still a minority, but enough to "raise eyebrows" and clearly unsustainable as a long‑term strategy. Those extreme deals, concentrated in submarkets where multiple lease‑ups are visible from the same corner, are typically the last tools owners reach for when pressure is greatest and thus the first they will withdraw as occupancy improves.

Lighter incentives have moved in the opposite sequence. Fee waivers—on applications, amenities, parking or administrative charges—were often the earliest concessions on the table because they are smaller in aggregate dollar terms and easier to reverse. One‑month‑free offers, long familiar in lease‑up or competitive submarkets, are likely to persist even as the most dramatic packages recede, especially in metros where vacancy remains well above pre‑cycle norms.

Montgomery sums up the dynamic as a "last in, first out" pattern: operators will roll back three‑month‑free deals first, then slowly trim other incentives as supply continues to contract and demand firms.

Better Than 2025, But Not "Normal"

Montgomery is careful to avoid prescriptive advice, noting that CoStar is not in the business of telling owners how to manage their assets. What he is willing to say is that "better days are on the horizon" as the industry moves past the peak of the construction cycle.

CoStar expects many markets that saw steep rent declines over the past couple of years to return to positive territory this year, while others should at least break even; even the laggards still in negative territory by year‑end are, in his view, "cutting their losses" relative to 2025.

The bigger picture, as he frames it, is one of a sector finally moving in the right direction after an unusually sharp supply bulge. Supply has peaked, new deliveries are falling and 2026 is shaping up as a transition year in which operators gradually reclaim some pricing discipline without yet being able to walk away from concessions entirely.

For investors underwriting deals in Sarasota, Charlotte, Austin, San Antonio, Phoenix and similar markets, that means building in a longer runway for concessions to normalize—and watching effective rents, not just the asking line on the rent roll.