The Sunbelt and Multifamily: Oversupply Isn’t the Whole Story

For the past two years, one word has dominated conversations about the Sunbelt apartment market: oversupply.

The numbers behind the narrative are real. A wave of multifamily projects that broke ground during the pandemic construction boom came online between 2023 and 2025, flooding many fast-growing markets throughout the Southwest and Southeast with new inventory.

Rent growth slowed, concessions increased, and occupancy rates declined, fueling headlines that painted the entire region as overbuilt.

But industry experts told Connect CRE that the reality is more nuanced. While the metrics are accurate, treating the Sunbelt as a single apartment market overlooks the differences in local economies, demand, demographics and market fundamentals that determine whether new supply is a problem or a temporary growing pain.

“I would not say the supply numbers themselves are exaggerated,” said Casey MacMaster, Bonaventure’s senior vice president, investment and portfolio manager. “The numbers are what they are. The consideration is how the narrative is framed.”

More Than a Market

One of the largest problems with the oversupply narrative is classifying the Sunbelt as a single entity. It’s not.

It’s a broad geographic label covering roughly 15 to 18 states stretching from Southern California across the Southwest and Gulf Coast to the Southeast.

Those states have different economies, regulatory environments and business climates. Texas, Florida, Georgia and Tennessee consistently rank among CNBC’s top states for business, while Mississippi and Louisiana rank near the bottom. California’s economy is driven by technology, entertainment and aerospace, while South Carolina continues to attract advanced manufacturing and industrial investment.

These different jobs economies attract different populations. And those populations drive apartment demand.

“The biggest misconception is that the Sunbelt is a single, uniform investment story,” said First American Exchange Company’s Divisional Counsel, Ashley Stefan.

AMZA Capital President Adrian Mathai agreed, saying that treating the entire region as one market is the core error behind much of today’s “too much supply” coverage.

Local Markets Tell Different Stories

Looking beneath regional averages reveals how different individual markets have performed.

According to MMG Real Estate Advisors, most major Sunbelt markets continue to post flat or negative rent growth. Yet the underlying fundamentals vary considerably from metro to metro.

MMG said that Austin reported nearly 14,900 apartment completions during the first quarter of 2026, but demand actually exceeded new deliveries, with more than 20,000 units absorbed during the same period. Houston, meanwhile, delivered a little over 14,000 units, but recorded significantly lower absorption.

Those differences help explain why similar supply figures can produce very different outcomes.

“The markets under the most pressure are those that absorbed the heaviest supply,” MacMaster said. “They drew the most capital, they took on the newest units, and they’re feeling the elevated vacancy and rent pressure right now.”

Markets that saw more measured development, including Mobile, Alabama, and Charleston, South Carolina, have generally remained more resilient.

The same pattern exists within individual metros.

Benjamin Gutkin, a principal with JAG Development and a longtime Phoenix-area developer, said Central Phoenix is still working through heavy construction activity and the resulting supply constraints. At the same time, nearby Scottsdale has experienced a different supply-demand dynamic despite facing similar rent pressures.

“There was so much new construction in Phoenix, and not enough demand to keep up with it,” Gutkin said. Still, he believes the imbalance is temporary as leasing activity continues to improve.

That distinction matters because broad metro statistics often mask what’s happening at the neighborhood level.

“People are looking at metro-level vacancies and applying them to every submarket and asset,” Kingbird Investment Management Vice President Justin Hoogerheyde said. “Each market, submarket and property has its own supply-demand balance.”

Supply Is Only Half the Equation

The current discussion tends to focus specifically on deliveries. But the experts noted that supply is only part of the issue.

The same migration trends that encouraged developers to build during 2021 and 2022 also created unprecedented apartment demand across much of the Sunbelt.

“Those conditions of record-low vacancy, double-digit rent growth and historically low interest rates created excellent opportunities for developers to build,” Neil Schimmel, CEO of Investors Management Group and Parktown Living, said.

Mathai said today’s imbalance is better understood as more of a timing issue rather than a demand problem. Projects breaking ground during the pandemic boom reached completion after capital markets tightened and migration slowed.

As a result, many of the neighborhoods now described as overbuilt are concentrated in a handful of high-delivery corridors, while surrounding areas remain relatively healthy.

Gutkin also believes the issue is temporarily softer demand rather than permanent oversupply.

“We projected strong demand from young adults moving into multifamily, but that didn’t materialize,” he said. “Right now, more adult children are staying home with their parents.”

Even so, apartment absorption has remained positive across much of the region.

“Headlines often focus on vacancy creep, rent softness and elevated concessions, each of which are current but short-term metrics,” MacMaster said. “What they’re missing entirely is how fast these units are actually leasing.”

Absorption, he added, tells a much more complete story than deliveries alone.

Different Apartments, Different Renters

The recent construction cycle has also been heavily concentrated in the higher end.

“Almost all of the new supply delivered has been Class A, while the Class A renter pool has stayed relatively stagnant,” Schimmel said.

That has intensified competition among newly built communities, leading to greater concessions and softer rents.

By contrast, workforce and middle-market apartments continue to benefit from affordability challenges that have kept many households from homeownership.

“These asset types are benefitting from relatively resilient demand,” Stefan said.

Looking Beyond the Headlines

No one disputes that Sunbelt markets experienced one of the largest apartment construction waves in decades. Nor do industry experts deny that some metros and neighborhoods will require time to absorb the influx of new units.

But reducing the discussion to “oversupply” overlooks the broader forces impacting apartment performance.

Employment growth, household formation, affordability challenges and business migration continue to support long-term apartment demand across many Sunbelt markets.

Looking forward, the experts said today’s situation is less of a crisis and is more of a digestion period, following a development cycle that yielded an abundance of supply.

Still, not every property will emerge from the situation in the same shape. Assets built in problematic locations or aimed at the wrong renter could continue to struggle, Hoogerheyde said.

However, “better-located assets with a more attainable rent profile in markets that have a durable economic environment should look very different once the current supply wears off,” he said.