The extraordinary construction wave that defined the 2022–2024 cycle has clearly broken, giving way to a sharp national reset in the development pipeline. After hitting a 40-year high in 2024, annual deliveries are now retreating at a meaningful pace, down roughly 24% through the first 10 months of 2025 and on track for an even steeper pullback in 2026. Much of this correction is concentrated in major Sun Belt metros where the surge in pandemic-era building is now unwinding. Markets such as Atlanta, Austin, Nashville, and Phoenix are posting significant year-over-year declines in both deliveries and units under construction, reflecting a tougher financing environment, persistent rent softness, and a near-term need to work through elevated vacancy. If the current pace holds and the broader economy continues on its present trajectory, this supply contraction should give overheated Sun Belt markets room to recover, supporting stronger absorption, firmer occupancy, and a gradual return to rent growth through late 2026.

However, the backdrop isn’t without risk. Increasingly, data points to a “K-shaped” economy in which higher-income consumers continue to spend while lower- and middle-income households face mounting pressure. Consumer sentiment has slipped to its lowest level in more than three years as benefits disruptions, persistent inflation, and rising job insecurity weigh most heavily on the lower end of the income spectrum. Should conditions among these key renter cohorts deteriorate further—driven by elevated debt burdens, stagnant wage growth, or employment stress—leasing activity and rent growth in more affordability-sensitive segments could weaken materially. The supply correction may still unfold as expected, but the pace and durability of any recovery in occupancy and rents will hinge on broad-based consumer health, not solely the resilience of higher-income households.

CoStar’s construction and delivery data reinforce that arc: supply additions reached a 40-year high in 2024, with annual deliveries peaking in Q4 near 700,000 units. From here, CoStar projects annual supply to fall about one-third in 2025 (≈460,000 units) and nearly 40% in 2026 (≈280,000 units)—the lowest since 2014. In short, starts are popping as the backlog converts to groundbreakings, but softer permitting and a shrinking under-construction pipeline point to a smaller delivery wave in 2026.