After four years of relentless rent growth, U.S. apartment pricing finally reversed. CoStar data show a 0.3% national rent drop in September —the sharpest decline for that month in over 15 years. The national average rent of $1,712 marks three straight months of stagnation, a clear sign that oversupply has caught up with demand. Landlords who once dictated rents are now offering concessions just to maintain occupancy. This shift from scarcity to surplus is reshaping underwriting assumptions, capital flows, and valuation models across the multifamily sector.

A glut of new units—concentrated in Sunbelt metros such as Austin, Phoenix, and Nashville—has diluted landlords’ leverage. Every U.S. region recorded a monthly rent decline in September; the West led (-0.5%), and the South followed (-0.4%). Vacancy has risen to roughly 6.5–7.0%, versus 5.5% pre-pandemic. Developers still have hundreds of thousands of units in lease-up, leaving many owners to offer one to two months free rent to stay competitive. The result: effective rents barely match inflation, and real rent growth has turned negative.

The downturn is uneven. Midwest and Northeast markets still show modest +2 to +3% YoY gains, benefiting from limited new construction. By contrast, Austin (-4.4%) and Denver (-3.8%) lead the decliners. San Francisco (+6.1%) and Chicago (+3.8%) illustrate how barrier-to-entry markets remain resilient. Class A urban high-rises face the heaviest discounting, while Class B/C garden stock holds occupancy as renters trade down. In practice, the U.S. apartment market has split into two currents—oversupplied luxury and undersupplied workforce.

Operators and lenders are re-running spreadsheets. Rent growth assumptions once set at 5% are being cut to 0–2% through 2025. Economic vacancy inputs are rising 50–100 bps to reflect weaker absorption. Expense growth is being capped near 3% annually to protect DSCR margins. At current rents and rates (~6.0–6.5%), a 1.30× coverage ratio is the new minimum for comfort. The repricing of expectations is as important as the rent decline itself: a discipline reset after a decade of bullish underwriting.

Even as the Fed edges toward a 3.75–4.0% policy rate, multifamily borrowing costs remain sticky. Mortgage spreads stay wide as lenders price in operational risk. With flat NOI and no rent tailwind, investors are demanding higher going-in yields. Cap rates for Class A assets have expanded 25–50 bps year over year. Some owners are pausing sales rather than accept repriced bids, but value-add capital sees opportunity: today’s distress may be tomorrow’s good vintage.

The operator’s lens has narrowed to occupancy. Renewal incentives, shorter leases, and amenity credits are now core tools. Marketing spend is rising to offset soft traffic. Every 1% vacancy swing can erase months of rent push. Portfolio managers are also trimming distributions to build cash reserves, pre-empting covenant issues. As one Midwest operator summed up: “It’s not a crisis—it’s a discipline test. Occupancy is our yield this year.

Deliveries will peak in late 2025 ( ≈ 400k units ) and taper through 2026 as starts decline. Vacancy may top out near 7.5% before gradually improving. Rent growth is expected to hover around zero for the next three quarters, recovering to 2–3% by 2027 as supply and demand re-equilibrate. Markets like Austin and Charlotte face two more years of leasing pressure; San Francisco and New York could tighten earlier. Long-term demographic drivers remain sound, suggesting this is a cyclical reset, not a structural decline.