Why are apartment rents falling in Phoenix and Las Vegas if a supply cliff is coming?

Deliveries lag construction starts by 18 to 24 months, so 2026 is still absorbing the tail of a record supply wave even though starts have already collapsed. The soft rents reflect current oversupply, while the thin pipeline that follows is a separate, later event that is already baked in.

What does the 2027 supply cliff mean for underwriting a multifamily acquisition today?

It means the supply side of the recovery is largely fixed and low, so the main risk you are underwriting is demand, not new competition. Underwrite flat to modestly negative rents and continued concessions through late 2026, and stress the demand case (jobs and migration) rather than assuming a supply surprise.

Which of VAC's markets is furthest along in the multifamily cycle?

Boise is turning first, with units underway about 70 percent below the 2022 peak and absorption forecast to beat completions for the first time since 2020. Phoenix is deepest in the wave with about 12.5 percent vacancy, and Las Vegas is flat and stabilizing with vacancy near 5.9 percent.

What is the most mispriced multifamily asset in this environment?

Often the recent lease-up owned by a merchant builder facing a maturing construction loan. Its trailing-12 income is buried in concessions and understates stabilized potential, and buying it below replacement cost matters more than the cap rate because no one can build competing product at that basis today.

Will rents recovering to prior levels restore prior returns?

Not fully. Operating expenses reset higher during the cycle, with pass-through insurance reaching about 4.78 percent of multifamily revenue in 2024 versus 1.95 percent in 2000. A rent recovery to 2021 levels does not restore 2021 margins, so recovered rents should be underwritten against today's expense base.

The 2027 Apartment Supply Cliff Is Already Locked In

Key Takeaways

U.S. multifamily starts fell to about 55,000 units in Q1 2026, the lowest since 2011 and roughly 73 percent below the early-2022 peak, per Commercial Observer.
Because deliveries lag starts by 18 to 24 months, the thin 2027-2028 supply pipeline in Phoenix, Las Vegas, and Boise is already largely fixed and cannot be added to.
Phoenix delivered 21,000 units against 17,000 absorbed in 2025, pushing vacancy to about 12.5 percent and rents down 3.0 percent, per a February 2026 Phoenix market report.
Boise units underway are about 70 percent below the late-2022 peak, and net absorption is forecast to outpace completions for the first time since 2020, per MMG Real Estate Advisors.
With supply for the recovery years close to locked, the real underwriting risk is a demand or jobs recession, not new competing product.
Pass-through insurance hit about 4.78 percent of multifamily revenue in 2024, up from 1.95 percent in 2000, so recovered rents do not restore prior margins.

The short answer

The flat-to-negative apartment rents across Phoenix, Las Vegas, and Boise right now are the tail of a supply wave that is ending, not the start of a structural decline. Multifamily construction starts have already fallen to a decade low, which means the 2027 and 2028 delivery pipeline is effectively set, and thin. No developer can start a mid-rise today and open it in time to change 2027 supply. That reframes the acquisition question for our markets: the supply side of the next recovery is close to locked, so the variable an acquirer is really underwriting is demand, not competition from new product.

We are writing this because the pain is still landing while the fix is already built into the numbers, and those two facts point in opposite directions.

What the starts data actually shows

Apartment construction has gone from flood to trickle in about three years. Deliveries peaked at roughly 690,000 units nationally in the fourth quarter of 2024, the highest in about 40 years, per CBRE's U.S. Real Estate Market Outlook 2026. CBRE puts 2025 deliveries near 523,000 and forecasts 2026 near 333,000, which would be the lowest annual total since 2014.

Starts, which drive deliveries 18 to 24 months later, have fallen further and faster. Commercial Observer reported in May 2026 that first-quarter multifamily starts hit about 55,000 units nationwide, the lowest quarterly level since 2011 and roughly 73 percent below the early-2022 peak. RealPage Market Analytics put units under construction at about 542,800 at the end of the second quarter of 2025, the smallest figure since the third quarter of 2015 and down about 37 percent year over year. Yardi Matrix traces completions falling from around 550,000 in 2025 to roughly 430,000 in 2026 and bottoming near 360,000 in 2027.

The point for an operator is not the exact figure, on which forecasters differ, but the mechanics. Deliveries in 2027 depend on starts that either already broke ground or never will. The supply side of that year is largely a matter of record, not forecast.

The three VAC markets are running the same play at different clocks

Phoenix is deepest in the wave. A February 2026 Phoenix multifamily report showed 21,000 units delivered in 2025 against 17,000 absorbed, pushing vacancy to about 12.5 percent and dragging rents down 3.0 percent on the year, with losses now spread across all property classes. AZBEX and RealPage figures had metro Phoenix carrying about 27,505 units under construction, third-most in the country. The effective rate slipped about 4.8 percent to roughly $1,479. Phoenix is the clearest case of near-term pain masking a pipeline that thins hard after this cohort clears.

Las Vegas is flat and stabilizing. Southern Nevada vacancy sat at 5.9 percent in the first quarter of 2026 per Colliers and Northmarq, with average asking rents around $1,465, barely changed from $1,461 a year earlier. Over the trailing year roughly 3,200 units delivered while net absorption ran closer to 1,500, which held rents flat and kept concessions in play, concentrated in the southwest valley and Henderson. About 4,200 units are slated for 2026, weighted to the back half, and the pipeline thins meaningfully after that. IRES estimated the valley was short about 800 units in 2025, a shortfall that widens past 2,800 in 2026, which is the demand side quietly tightening under the supply noise.

Boise is already turning. MMG Real Estate Advisors' Boise work shows units underway now roughly 70 percent below the late-2022 peak and about 45 percent below the historical average, with only about 1,848 units in the pipeline, a 4.4 percent bump to inventory. Net absorption there is forecast to outpace completions for the first time since 2020, with occupancy holding near 93 percent and median rents around $1,850 and rising modestly. Boise is the preview of what the supply cliff does to a market once deliveries roll off.

How we underwrite into this

The trap works in both directions: underwriting to today's distress and calling the sector uninvestable, or underwriting to a fast snapback and paying for a recovery that arrives on its own schedule. Neither respects the timing. A few principles we hold to.

Underwrite demand, not supply, as the real risk

Because 2027-2028 supply is largely fixed and low, the recovery does not depend on developers behaving. It depends on jobs and in-migration holding up. So the stress case that matters is a demand recession, not a supply surprise. In Phoenix, Las Vegas, and Boise, that means watching payrolls and net domestic migration far more than the crane count, because the crane count for the recovery years is already known.

Do not buy the snapback into 2026

Deliveries lag starts, so 2026 still absorbs the tail of the wave. We underwrite flat to modestly negative asking rents and continued concessions through at least the back half of 2026 in the saturated submarkets, and we do not let a 2027 recovery assumption carry the going-in numbers.

The mispriced asset is the recent lease-up

The motivated seller today is often a merchant builder or lease-up sponsor with a construction loan coming due and a trailing-12 still buried in concessions. That is a physically new building whose in-place NOI understates stabilized potential. Buying that asset below replacement cost matters more than shaving another 25 basis points off the cap rate, because at current construction costs no one can deliver competing product at your basis.

Remember the expense line reset too

The recovery is a revenue story, and revenue is only half of it. Insurance, taxes, and payroll have all stepped up. A Federal Reserve analysis cited across multifamily coverage put pass-through insurance at about 4.78 percent of multifamily revenue in 2024, up from 1.95 percent in 2000, a 228 percent rise. Rents returning to 2021 levels do not restore 2021 margins, so we underwrite the recovered rent against today's expense base, not yesterday's.

The one-line version

The rents are soft because the supply wave is still washing through, and the supply wave is ending because starts already collapsed. In Phoenix, Las Vegas, and Boise the recovery's supply side is close to a settled fact. The open question is demand, which is where we spend our diligence.

Sources

CBRE, U.S. Real Estate Market Outlook 2026 (Multifamily): delivery peak of roughly 690,000 units in Q4 2024, 2025 near 523,000, 2026 near 333,000.
Commercial Observer, "U.S. Multifamily Construction Starts Drop to Lowest Level Since 2011" (May 2026): Q1 2026 starts near 55,000 units, about 73 percent below the early-2022 peak.
RealPage Market Analytics, "US Apartment Construction Activity at a Decade Low": units under construction near 542,800 at end of Q2 2025, down about 37 percent year over year.
Yardi Matrix, revised multifamily supply forecasts: completions falling from about 550,000 (2025) to about 430,000 (2026) to about 360,000 (2027).
getmultifamily, Phoenix Multifamily Market Report (February 2026): 21,000 units delivered vs 17,000 absorbed in 2025, vacancy about 12.5 percent, rents down 3.0 percent, effective rate about $1,479.
AZBEX and RealPage, cited Phoenix pipeline data: about 27,505 units under construction, third-most nationally.
Colliers, Las Vegas Multifamily Market Report 2026 Q1, and Northmarq Las Vegas multifamily research: vacancy 5.9 percent, asking rents about $1,465 vs $1,461 a year earlier, about 3,200 units delivered against roughly 1,500 absorbed, about 4,200 units slated for 2026.
IRES (Las Vegas), new apartment supply and rent analysis: valley short about 800 units in 2025, widening past 2,800 in 2026.
MMG Real Estate Advisors, Boise forecast: units underway about 70 percent below the late-2022 peak and about 45 percent below the historical average, about 1,848 units in the pipeline, net absorption forecast to outpace completions for the first time since 2020, occupancy near 93 percent.
Federal Reserve analysis cited in multifamily coverage (via PREA and NAA): pass-through insurance costs at about 4.78 percent of multifamily revenue in 2024, up from 1.95 percent in 2000, a 228 percent increase.

Frequently Asked Questions

Why are apartment rents falling in Phoenix and Las Vegas if a supply cliff is coming?: Deliveries lag construction starts by 18 to 24 months, so 2026 is still absorbing the tail of a record supply wave even though starts have already collapsed. The soft rents reflect current oversupply, while the thin pipeline that follows is a separate, later event that is already baked in.
What does the 2027 supply cliff mean for underwriting a multifamily acquisition today?: It means the supply side of the recovery is largely fixed and low, so the main risk you are underwriting is demand, not new competition. Underwrite flat to modestly negative rents and continued concessions through late 2026, and stress the demand case (jobs and migration) rather than assuming a supply surprise.
Which of VAC's markets is furthest along in the multifamily cycle?: Boise is turning first, with units underway about 70 percent below the 2022 peak and absorption forecast to beat completions for the first time since 2020. Phoenix is deepest in the wave with about 12.5 percent vacancy, and Las Vegas is flat and stabilizing with vacancy near 5.9 percent.
What is the most mispriced multifamily asset in this environment?: Often the recent lease-up owned by a merchant builder facing a maturing construction loan. Its trailing-12 income is buried in concessions and understates stabilized potential, and buying it below replacement cost matters more than the cap rate because no one can build competing product at that basis today.
Will rents recovering to prior levels restore prior returns?: Not fully. Operating expenses reset higher during the cycle, with pass-through insurance reaching about 4.78 percent of multifamily revenue in 2024 versus 1.95 percent in 2000. A rent recovery to 2021 levels does not restore 2021 margins, so recovered rents should be underwritten against today's expense base.

Key Takeaways

U.S. multifamily starts fell to about 55,000 units in Q1 2026, the lowest since 2011 and roughly 73 percent below the early-2022 peak, per Commercial Observer.
Because deliveries lag starts by 18 to 24 months, the thin 2027-2028 supply pipeline in Phoenix, Las Vegas, and Boise is already largely fixed and cannot be added to.
Phoenix delivered 21,000 units against 17,000 absorbed in 2025, pushing vacancy to about 12.5 percent and rents down 3.0 percent, per a February 2026 Phoenix market report.
Boise units underway are about 70 percent below the late-2022 peak, and net absorption is forecast to outpace completions for the first time since 2020, per MMG Real Estate Advisors.
With supply for the recovery years close to locked, the real underwriting risk is a demand or jobs recession, not new competing product.
Pass-through insurance hit about 4.78 percent of multifamily revenue in 2024, up from 1.95 percent in 2000, so recovered rents do not restore prior margins.

The short answer

We are writing this because the pain is still landing while the fix is already built into the numbers, and those two facts point in opposite directions.

What the starts data actually shows

The three VAC markets are running the same play at different clocks

How we underwrite into this

Underwrite demand, not supply, as the real risk

Do not buy the snapback into 2026

The mispriced asset is the recent lease-up

Remember the expense line reset too

The one-line version

Sources

CBRE, U.S. Real Estate Market Outlook 2026 (Multifamily): delivery peak of roughly 690,000 units in Q4 2024, 2025 near 523,000, 2026 near 333,000.
Commercial Observer, "U.S. Multifamily Construction Starts Drop to Lowest Level Since 2011" (May 2026): Q1 2026 starts near 55,000 units, about 73 percent below the early-2022 peak.
RealPage Market Analytics, "US Apartment Construction Activity at a Decade Low": units under construction near 542,800 at end of Q2 2025, down about 37 percent year over year.
Yardi Matrix, revised multifamily supply forecasts: completions falling from about 550,000 (2025) to about 430,000 (2026) to about 360,000 (2027).
getmultifamily, Phoenix Multifamily Market Report (February 2026): 21,000 units delivered vs 17,000 absorbed in 2025, vacancy about 12.5 percent, rents down 3.0 percent, effective rate about $1,479.
AZBEX and RealPage, cited Phoenix pipeline data: about 27,505 units under construction, third-most nationally.
Colliers, Las Vegas Multifamily Market Report 2026 Q1, and Northmarq Las Vegas multifamily research: vacancy 5.9 percent, asking rents about $1,465 vs $1,461 a year earlier, about 3,200 units delivered against roughly 1,500 absorbed, about 4,200 units slated for 2026.
IRES (Las Vegas), new apartment supply and rent analysis: valley short about 800 units in 2025, widening past 2,800 in 2026.
MMG Real Estate Advisors, Boise forecast: units underway about 70 percent below the late-2022 peak and about 45 percent below the historical average, about 1,848 units in the pipeline, net absorption forecast to outpace completions for the first time since 2020, occupancy near 93 percent.
Federal Reserve analysis cited in multifamily coverage (via PREA and NAA): pass-through insurance costs at about 4.78 percent of multifamily revenue in 2024, up from 1.95 percent in 2000, a 228 percent increase.

Frequently Asked Questions

Why are apartment rents falling in Phoenix and Las Vegas if a supply cliff is coming?: Deliveries lag construction starts by 18 to 24 months, so 2026 is still absorbing the tail of a record supply wave even though starts have already collapsed. The soft rents reflect current oversupply, while the thin pipeline that follows is a separate, later event that is already baked in.
What does the 2027 supply cliff mean for underwriting a multifamily acquisition today?: It means the supply side of the recovery is largely fixed and low, so the main risk you are underwriting is demand, not new competition. Underwrite flat to modestly negative rents and continued concessions through late 2026, and stress the demand case (jobs and migration) rather than assuming a supply surprise.
Which of VAC's markets is furthest along in the multifamily cycle?: Boise is turning first, with units underway about 70 percent below the 2022 peak and absorption forecast to beat completions for the first time since 2020. Phoenix is deepest in the wave with about 12.5 percent vacancy, and Las Vegas is flat and stabilizing with vacancy near 5.9 percent.
What is the most mispriced multifamily asset in this environment?: Often the recent lease-up owned by a merchant builder facing a maturing construction loan. Its trailing-12 income is buried in concessions and understates stabilized potential, and buying it below replacement cost matters more than the cap rate because no one can build competing product at that basis today.
Will rents recovering to prior levels restore prior returns?: Not fully. Operating expenses reset higher during the cycle, with pass-through insurance reaching about 4.78 percent of multifamily revenue in 2024 versus 1.95 percent in 2000. A rent recovery to 2021 levels does not restore 2021 margins, so recovered rents should be underwritten against today's expense base.