Sun Belt and Mountain West regions lead nation in drawing down apartment supply

Article originally posted on CoStar on November 10, 2025

A key factor in the performance of the U.S. apartment sector over the past two years has been the large number of new units added to supply, an increase that far outpaced demand — particularly in the South, Southwest and Mountain West regions. This imbalance has resulted in elevated vacancy rates and falling rents.

The tide has finally begun to turn this year, with deliveries of new apartment units projected to decline by nearly 30% compared to 2024. Several of the markets most affected by elevated deliveries are among those experiencing the biggest declines in the number of new units being completed.

On a total unit basis, three large markets in Texas are leading the way. The number of units projected to deliver in Austin is expected to decline by over 15,000 units, from 32,000 in 2024 to 17,000 this year. In Houston, apartment deliveries are set to fall by nearly 13,000 units to just over 12,000, and in Dallas-Fort Worth, the number of new apartment units is projected to decline by more than 10,000 in 2025 from last year. The scale of these pullbacks is notable: Austin’s drop equates to a 47% reduction, while Houston’s is an even steeper decline of 51%.

Three other large multifamily markets in the South and Mountain West are also seeing significant supply drawdowns. The number of Atlanta’s 2025 apartment deliveries is declining by 36%, or over 9,300 units. Phoenix’s supply is falling by over 7,200 units, or 28%, and Denver’s deliveries are down by 6,800 units, or 37%. In the Midwest, Minneapolis is also projected to experience a substantial decline, with 2025 deliveries expected to fall by 7,100 units, or 67%.

While these total declines are notable, several other markets are projected to see even greater reductions in new units added this year on a percentage basis. Norfolk, Virginia, a leader in multifamily rent growth in the South region, will see 76% fewer units delivered in 2025 compared to 2024, a decline from 3,400 units to fewer than 900. In California, the East Bay/Oakland area is projected to see a 73% decline in its apartment construction pipeline, to just 700 units, and apartment deliveries in Baltimore are projected to drop by 70% to approximately 1,200 units.

Six other U.S. markets are also projected to see apartment deliveries fall by more than 50% year over year, including Portland, Oregon, and Louisville, Kentucky, each with a projected 58% decline; Jacksonville, Florida, and Chicago are both expecting a 52% decline, and Philadelphia is looking at a 51% drop.

While 39 of the largest 50 U.S. apartment markets are projected to add fewer units this year, 11 markets are still bucking the drawdown trend and adding substantial new supply. Omaha, Nebraska, is a leader on both an absolute and percentage basis, with 2025 deliveries increasing by more than 2,200 units this year — a 135% jump versus 2024.

With an under-construction pipeline accounting for 4.9% of the market’s existing inventory, Omaha will be a market to watch for potential performance issues resulting from the rising inventory. Annual rent growth in Omaha is currently strong, measuring an average annual increase of 2.6% in the third quarter, the sixth-highest increase rate among large U.S. markets, and likely the driving force behind the continued ramp-up in development activity.

Another market to keep an eye on is Boston, where the apartment inventory is increasing by over 1,800 units this year, or 23%, and construction levels remain elevated at 4.5% of existing inventory. Rent growth decelerated to 1% in the third quarter as a wave of more than 6,000 units came to market over the past two quarters.

Richmond, Virginia, is also feeling the effects of rising supply in 2025. While the year-over-year supply change is just 14%, or 389 units, the new units are being added in a market with 5.1% of its inventory currently under construction. Annual rent growth for Richmond apartments has decelerated rapidly in 2025, declining from 2.5% in the first quarter to just 0.8% in the third quarter of this year.

As the number of new apartment units being added to the supply declines over the coming quarters, the Sunbelt and Mountain West regions, which are under the heaviest weight of the supply imbalance, should begin to see supply and demand come back into balance. However, the changes aren’t expected to have an immediate impact. In fact, CoStar just revised its outlook for the U.S. multifamily sector’s performance, lowering rent growth expectations and projecting that vacancy will decline more gradually than previously expected.

The construction declines are projected to accelerate further in 2026, allowing occupancy to catch up, which will result in lower vacancy rates and the return of pricing power in markets that have experienced rent declines over the past two years.

Not all markets have shrinking pipelines, however, but in those where construction is already waning, the effect on rent growth performance may be measurable.