The Apartment Glut Is Going Keto
Welcome to the Skeptical Investor Blog on BP. A frank, hopefully insightful, dive into real estate and financial markets. From one real estate investor to another.
Today's Read Time: 9 minutes
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This week we're talkin' supply: the apartment glut that appears to be dying of natural causes, the new law that "bans" Wall Street from buying houses (it's theater), and why homebuilders are cutting prices while your neighbor's house sets another record.
Let's get into it.
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Today's Interest Rate: 6.81%
(☝️ .18% from this time last week, 30-yr mortgage) Mortgage News Daily
The Weekly 3 in News:
- --The apartment market may have finally hit bottom: national vacancy fell for the first time since 2021, absorption topped 250,000 units in the first half, and quarterly rent growth hit a four-year high (Jay Parsons; RealPage 2Q Update)
- --Wall Street's biggest landlords are now net sellers of homes: institutional owners listed 9,447 single-family rentals in July, more than double February's count, as the new ROAD to Housing Act's purchase ban looms for January 2027 (CNBC)
- --New-home prices keep falling while existing-home prices set records: June's median new home sold for $398,300, down 2.7% from a year ago, while the median existing home hit an all-time high of $440,600 (Census; NAR)
--Bonus! Waymo expanded its Nashville robotaxi zone again in late June and is testing airport service. The robots like the Sun Belt too (Axios).
A Few Fun Things Happening in Nashville This Week:
- --⭐ Bob Dylan with Lucinda Williams — Ascend Amphitheater, Saturday Aug 1, 7:00 pm. A living legend on the riverfront, with a Southern-songwriter icon opening. (Ascend)
- --Pavement — Ryman Auditorium, Monday July 27, 7:30 pm. '90s indie-rock royalty at the Mother Church. (Nashville Guru)
- --Train, "Drops of Jupiter: 25 Years" tour — Ascend Amphitheater, Friday July 31. Singalong radio hits by the river. (Ascend)
- --Nashville Sounds vs. Charlotte Knights — First Horizon Park, homestand through Aug 2. Cheap tickets, cold beer, minor-league fireworks. (Nashville Guru)
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Washington Just Banned Wall Street From Buying Houses. It's Theater.
This month, Congress passed The 21st Century ROAD to Housing Act in a rare bipartisan vote of 358-32 in the House, 85-5 in the Senate (Goodwin Law). The marquee provision is titled: "Homes Are For People, Not Corporations."
Any for-profit investor controlling 350 or more single-family homes is barred from buying additional existing single-family houses starting January 2027, penalties up to $1 million or three times the purchase price per violation (H.R. 6644).
"Yeah, homes are for living, not for Wall Street!"
Well, careful. That's misleading, at best.
I'll explain.
First, I'll acknowledge that there are some markets where large companies do own a decent concentration of the housing stock. These markets are: Atlanta, where 25% of the single-family rental market is owned by institutions, 21% in Jacksonville, and 18% in Charlotte (GAO). Surprisingly, in metro Atlanta's Henry County, corporate owners hold 64% of single-family rentals; in Paulding County, 78% (Georgia State research via GPB).
If you were a first-time buyer in those ZIP codes in 2021 losing every bid to a cash offer from a company with a $10 billion balance sheet, your anger is not theater, it's very real.
Wow, I didn't know this until this week, researching for this article.
So the problem can be significant, in specific places. The question is 1) is this widespread and 2) whether the policy remedy will affect the outcome.
It turns out, for both, no.
Institutions own very few homes.
Just 3% to 5% of single-family rentals, and about 1% of all single-family homes (Parcl Labs via CNBC; Urban Institute).
Even in the latest government data (which is not terribly accurate unfortunately) institutions own between 4% and 22% of single-family rentals across six studied metros, but 3% or less of all single-family homes in every one of them (GAO).
Remember, this important differentiator: rentals owned (and which they likely built for the purpose of renting) vs the narrative of owning a home someone would buy.
Sources: Parcl Labs via CNBC (Jul 2026), John Burns Research, GAO/Urban Institute.And the data keep confirming it: the big landlords have been net sellers for years. This year alone they've sold 3,180 more homes than they've bought, and their July listings (9,447) are more than double February's (CNBC). Congress has heroically banned people from doing something they had already stopped doing.
Jay Parsons has been the loudest truth-teller here. His read: single-family rental investors have been selling more homes than they've been buying for a decade, and markets with higher institutional presence haven't seen outsized spikes in home prices or rents (Parsons). Before the final version passed, he called the harsher Senate draft a "supply killer stuffed with red tape."
The final law got partially defanged: build-to-rent purchases are exempt, buying new homes from builders is allowed, and the Senate's forced-divestiture mandate got stripped out (John Burns Research). Good thing, because BTR is actual new supply and it was already shrinking before Congress showed up: from roughly 84,000 starts in 2024 to 68,000 in 2025 to a 62,000 trailing pace, down 26% year over year (NAHB/Census via Eye on Housing).
Source: NAHB/Census via Eye on Housing.Remember, We Need More Rentals Too!
Now, the law does include a renovate-to-rent exemption, where institutions can still buy existing homes if they substantially rehab them, with improvements valued at no less than 15% of the purchase price (Goodwin).
The problem is, operationally, because renovate-to-rent homes must be sold off to individual buyers within 7 years (with a tenant right of first refusal) (Goodwin), the likely outcome is developers step back, and stop building to rent. The sale exemption is too operationally heavy to use at scale.
Who fills that rental gap? Mom-and-pop investors, maybe, and I hope we do, but probably not and definitely not at the scale of building institutions are with their cheap access to capital/lending.
But if we don't, the second-order effect of a law will likely be fewer renovated rentals and more deferred maintenance in exactly the neighborhoods it claims to protect.
My Take: if you want affordable housing, you build more housing.
Full stop.
I wrote a whole piece on this: 'Affordable Housing' is Not Possible without a pro-development environment executed over years.
And there's an opportunity cost to the theater: every month Washington spends litigating a 1% ownership slice is a month not spent on zoning reform, permitting timelines, or the construction labor pipeline.
Further, we are short roughly 349,000 construction workers, a problem I covered in Eggs Are Cheap Again. Electricians, Not So Much.
That shortage will still be here in January 2027.
The "Wall Street landlord" mostly won't be.
And that is not a good thing.
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Is the Apartment Glut Finally Starving?
This is the big one for us landlords, apartment deliveries are continuing to crater. Supply glut continues to die. Or at least, is going Keto.
Chart on.
Source: RealPage 2Q 2026 Data Update.Trailing-year apartment deliveries have fallen from roughly 588,000 units at the late-2024 peak to 340,200 as of Q2: six straight quarterly declines, a 42% drop, and the first reading below the decade norm (RealPage 2Q Data Update). Only about 150,000 units were completed in the entire first half (Parsons).
This story has been building since I highlighted it a few weeks back.
Housing economist Jay Parsons, has tracked this cycle as honestly as anyone, summed up where we are:
"We're still in a [supply] hole, but now we're starting to dig our way out." (jayparsons.com)
The evidence:
1)) Demand never left. Absorption exceeded 250,000 units in the first half, per both RealPage and CoStar (Parsons). Renters kept showing up through the entire glut; they were simply spoiled for choice.
2)) Occupancy is healing. National occupancy is back to 95.5%, up two consecutive quarters (RealPage), and Apartment List's vacancy index just declined for the first time since late 2021 (Apartment List).
3)) Pricing is responding. Effective rents grew 1.4% quarter over quarter, the best pace in four years, though still down 0.2% year over year (RealPage); Apartment List's national YoY has improved from April's record low of -1.6% to -1.2% (Apartment List).
Where You Own Matters
"National" hides a wild split. San Francisco rents are up 7.4% year over year while San Antonio is down 5.0% and Austin down 4.3% (Apartment List). The Sun Belt is where the glut concentrated, so it recovers last, but even there the direction flipped: Austin has improved 360 basis points since March (Parsons).
Source: Apartment List.I'm Genuinely Unsure About Demand
The supply side of this story is close to locked; you can't un-cancel a project that never broke ground, and the architects' phones (ABI above) say no new wave is being drawn.
But the demand side deserves harder scrutiny.
One large factor, which the Fed has acknowledged too, is how much of the record absorption (ie renters) was immigration?
More than most people think.
Harvard's Joint Center finds recent immigrants accounted for roughly two-thirds of renter household growth in 2024, and about 20% of all U.S. renter households are headed by someone foreign-born, renting at double the rate of the native-born (Harvard JCHS via Multifamily Dive; CoStar). That tailwind is reversing fast: net international migration halved in 2025 and is projected to fall roughly 75% further this year, to about 321,000 (Census projections via JCHS). The foreign-born population actually shrank in the first half of 2025, the first decline in over fifty years (Pew).
Where does that bite? The bottom of the stack first. RealPage's Carl Whitaker says immigration effects are already "starting to trickle into" Class C performance, and his recovery ordering puts Atlanta and Nashville among the fastest healers while Austin, Phoenix, and San Antonio may wait until 2027 (Whitaker).
My Take: Cheaper rents are killing new construction, and dead construction resurrects rent growth.
This is the market working as it should.
The 2027-2028 will be a time of rent growth, after the market finishes absorbing the apartment glut.
For operators who held on through two years of concessions, the next few years will quietly pay for the last two, with the demand caveats above held firmly in the other hand. And remember: even in the flat-rent years, rentals kept paying the other ways, loan paydown, tax benefits, appreciation on the land underneath. That's the whole thesis of this book: the five ways real estate builds wealth. Rent growth is only one engine of five, and the four others never took a quarter off.
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My Skeptical Take
There's an old line commodity traders use, and housing - whatever HGTV story we tell ourselves about fancy kitchens - is a commodity business: the cure for low prices is low prices.
Nobody planned this diet.
Cheap rents (and high interest rates) made the next apartment project impossible to pencil, the construction loans dried up, and the cranes moved on. Two years later, the market is moving on, one unit at a time.
The glut is going keto, the market cut off the carbs.
Now compare that to Washington's approach this month: a law with a self-righteous name, a "villain" who owns about 1% of the housing stock, and a ban on purchases they'd already stopped making.
But it's all theater (unless you are in Atlanta, wow!).
The real lesson of this week is that markets correct through prices. Politics corrects through applause. Only one of those pours concrete.
So the operator's job is to notice which forces are self-correcting, position downstream of the correction, and be patient while the market works.
Every project that didn't break ground this summer will bring a story of rent growth in 2027-28.
Howard Marks, who has made a career of buying well when cycles turn, wrote down the only two rules you need this week:
"Rule No. 1: Most things will prove to be cyclical. Rule No. 2: Some of the greatest opportunities for gain and loss come when other people forget Rule No. 1."
Right now, a lot of people are forgetting Rule No. 1. Renters think the concessions are forever. Congress thinks a villain, not a cycle, sets their rent. And plenty of investors still think the glut is permanent. Meanwhile: deliveries down 42% from the peak, occupancy climbing, absorption holding. The cycle is turning while everyone argues about the last one.
That's not a market to fear. That may be a market to underwrite.
Until next time. Stay Curious. Stay Skeptical.
Herzliche Grüße,
-The Skeptical Investor
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