The last two years generated a lot of noise around the Sunbelt for multifamily investors. Record supply, rising vacancies, softening rents. The story was real, but it was also temporary.
The demand foundation hasn’t moved.
The South was the only region in the U.S. to record positive net domestic migration in 20241, with South Carolina, North Carolina and Texas leading all states in domestic in-migration relative to population size2. While the pace of migration has moderated from pandemic peaks, the structural pull factors—affordability relative to coastal markets and continued corporate relocation activity—remain in place.
Critically, the barriers to homeownership are keeping more people in rentals longer than at any point in recent history. At the end of the first quarter of this year, qualified income (income needed for annual homeownership to be no greater than 30% of annual income) was $120,143, while the actual median household income was just $85,8283. Americans aren’t choosing to rent—they’re locked into it.
The supply cycle has turned sharply.
In Q1 2026, U.S. multifamily construction starts fell to approximately 55,000 units—the lowest quarterly level since 2011 and a 73% decline from the 2022 peak, according to CoStar4.
In Q1 of this year, the market started to respond, with national multifamily vacancy falling to 4.8% (below the long-term average of 5.0%)5. It was the first time in the last three quarters that net absorption outpaced new competitions, signalling that multifamily demand is absorbing available supply—and quickly.
Where the exurbs (yes, the exurbs) fit in.
Within the Sunbelt, recovery is uneven—and that’s where the opportunity is. Downtown submarkets in markets like Dallas and Atlanta still carry elevated vacancy from the Class A supply wave, but CoStar data shows that vacancy is already plateauing—and declining—for attainable workforce housing.6 Suburban and exurban submarkets, where new supply is scarce and renters are gravitating towards affordability, are leading that recovery.
The big picture.
The supply peak is behind us, vacancy is beginning to compress and starts are at a 15-year low.4 At the same time, nationwide housing affordability challenges are maintaining a deep, durable pool of renters in the market. This is the type of supply-demand setup that can create strong opportunities for passive private real estate investors—and it deserves a closer look.
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