A handful of metros are doing the heavy lifting in today's multifamily market, but the real story is not raw rent growth or headline demand—it is how each city's unique mix of new supply and normalized absorption is dictating owners' pricing power.
A Market Defined By Too Much New Product
Grant Montgomery, national director of multifamily analytics at CoStar, describes the current phase as a transition period—and he puts the emphasis squarely on supply. Construction that ramped up during the post‑pandemic surge is still delivering into a market where absorption has cooled back to more typical levels. Rents increased just 0.2% in May, versus the roughly 0.35% gain more in line with a normal spring leasing season, a small but telling gap that reflects how much inventory is still being digested.
"The apartment market isn't being held back by weak demand," Montgomery says. "It's the amount of supply still working through the system, and that's extending the timeline for recovery."
He expects national vacancy to peak around late 2026 or early 2027, with any improvement after that driven more by a slowdown in new construction than by a demand surprise. Against that backdrop, the markets gaining real pricing power are those where the pipeline has already tightened and high homeownership costs are keeping renters in place.
San Francisco And Chicago Move Ahead
San Francisco is the clearest example of a market where demand is translating quickly into stronger rents because the pipeline is constrained. Montgomery points to the Bay Area's rebound in tech and AI hiring, which has pushed vacancy to its lowest level since 2001 and helped send average one‑bedroom rents to $3,356, up 8.3% year‑over‑year. Lease‑ups have outpaced new rentals since the market reignited in 2022, and with limited new product coming through, landlords are seeing more room to hold on price and trim concessions.
Chicago is a quieter but equally important story in this emerging split between markets with growing pricing power and those that are still stuck. The average one‑bedroom rent there stands at $2,044, with annual growth of 3.3%, and vacancy sits well below the national average of 8.5%. The construction pipeline has been trending lower since 2024, and renters are staying longer as elevated mortgage rates, taxes, and insurance costs make ownership harder to pencil.
CoStar's Adrian Brizuela says that Chicago renters are increasingly willing to "trade up" within the rental market because higher‑quality units still look like a relative value compared with buying a home. The combination of modest new supply and expensive ownership is gradually shifting leverage back toward landlords.
High‑Supply Sun Belt Markets Still Grinding
By contrast, many high‑supply Sun Belt markets remain in a holding pattern, even though they are among the most active in the country by volume. Montgomery cites Austin and similar metros as places where robust construction over the last two years has outpaced even solid leasing. Vacancy is elevated, rent growth is under pressure, and while the sharpest declines are easing, owners are still competing aggressively on price and concessions to keep buildings full.
Seattle offers a variation on the same theme. Major tech employers have eased hiring, and a sizable pipeline of new units has hit the market at the same time, pushing the average one‑bedroom rent to $2,093 but with a year‑over‑year change of ‑1.5%.
Concessions are deepest in the most supply‑heavy neighborhoods, and CoStar's Elliott Krivenko expects that even as construction slows, subdued population and job growth mean rent growth will recover only gradually. These are active markets by any leasing measure, but they are still treading water in terms of pricing power until more of that late‑cycle inventory is absorbed.
Spillover And Affordability Shape The Middle Ground
Between the clear "winners" and the high‑supply laggards are a set of spillover and affordability‑driven markets where pricing power is emerging more slowly but for many of the same reasons. Northern New Jersey is one, functioning as a release valve for New York City. In Newark, the average one‑bedroom rent is $1,610, roughly in line with the national figure of $1,642 and well below New York's $4,114.
New construction has outpaced absorption for five straight quarters, lifting vacancy from 5.2% at the end of 2024 to 6.4% at the start of 2026, yet the rate remains below the national average. As CoStar's Jared Koeck puts it, "even with recent supply deliveries, the market is not overbuilt," suggesting that as the pipeline thins, this region could also move into a stronger pricing position.
Philadelphia is another example of this middle ground. The average one‑bedroom rent there is $1,778, with year‑over‑year growth of 1.3%, and vacancy climbed from 4% in 2021 to 7.8% in 2024 after a burst of deliveries in 2023 and 2024. Construction has since cooled to a steadier pace.
CoStar's Brenda Nguyen points out that long‑standing underbuilding and durable "eds and meds" employment have allowed the market to absorb this wave of new product, with help from renter specials. For now, pricing power in these cities is more about preserving occupancy and gradually firming rents than about headline‑grabbing spikes.
Montgomery's central message is that these diverging paths all trace back to the same driver. Demand has normalized, but it has not disappeared. The markets gaining pricing power are those where constrained pipelines and the rising cost of homeownership are working in owners' favor, while high‑supply metros, however active, will keep treading water until their own overhangs clear.
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