New apartment construction has collapsed as financing costs and soft rents make projects uneconomical, while demand stays strong because mortgage rates are near 6.5% and home prices hit records. Fewer new units combined with millions of homes short means rents will rise over the next 12-24 months, benefiting existing apartment owners.
The number of units under construction nationwide has been cut in half from its peak, and permits, which tell you what's coming next, are still falling. Why did builders stop? Same reason— it's tough on you. High financing costs and soft rents made new projects stop making sense, so they pulled back hard. And here's what that means for you, the owner of an existing stabilized building. On the demand side, the renter pool stays full. With mortgage rates near 6.5% and home prices at record highs, a lot of would-be buyers are staying renters longer. More than half of all US mortgages are locked in below 4%. So existing homeowners aren't selling, and the country is still short several million homes. The people who need your apartments aren't going anywhere. So put the two together, demand stays firm, and the flood of new competition disappears over the next 12 to 24 months. That is the exact recipe for tighter occupancy and the return of real rent growth. Your building gets more valuable precisely because almost no one is building a competitor next to it. Now let me be straight with you because I won't sell you a fairy tale.
