The Biggest Rental Market Lie Just Collapsed (Vacancy Surge Exposed)

The media has been pretending that the rental crisis is about low supply, but that was a lie because today, for the first time in years, we have more empty units than we've ever had before, and the correction is unfolding faster than anybody could have expected. Here's the truth. The rental market is breaking. Construction surged, demand slipped, and affordability finally snapped.

And that combination is now flooding the market with vacant units at the fastest pace that we've seen since 2008. Let's dig into what is going on in the market and how this is going to impact you as an investor and how it's going to impact you as a renter. Renters, you're going to be really excited for this one. So, let's dig in.

The number one factor that came in was that investors basically had an incredible market because rental rates skyrocketed within a very short period of time. However, when the Federal Reserve came in in 2022 in March, started hiking interest rates, investors could no longer buy houses because they wouldn't cash flow. So if the cash flow on the rental is, you know, they're losing three, four, $500 per month, these large institutional investors that were buying up 30% of the housing stock, usually in affordable price points, they stopped buying. The numbers no longer made sense.

So here's a great chart from Reenture Consulting that shows this, right? If the cap rate is 4.4% but the interest rate is over 6%, it's even higher for an investment property. You usually have to put 25% down and your interest rates at least half a percent or a percent higher depending on the underwriting, then you have no chance of making this property make sense on paper. And people stopped buying and this is what we saw across the the board.

Buying single family rentals is no longer profitable due to mortgage rates being significantly higher than the cap rates, their unlevered profit. So, it's gotten so expensive that even investors cannot afford to buy in this market in the Sunb Belt. We expect this to continue. Now, when you have a lot of B investors that stop buying and a lot of inventory that's continuing to come on from the consumer, we have a bunch of what we call accidental landlords that's increasing the supply of rentals all at the same time.

Meanwhile, the builders continue building because they have to finish their projects and we have entire communities that are being turned into buildto- rent communities. And we have a massive supply that's coming on that's driving up vacancy to the highest levels that we haven't seen since 2008. And this is just the beginning of this story that's beginning to unfold. So look, again, we had this massive boom of investor purchases.

You can see this, this is a great chart from Red Fin. It says national investor purchases. You can see that there were so many purchases even over the years back uh since the great financial crisis, it started to increase every single year. We started seeing this here in Jacksonville.

Invitation Homes, Progress Homes, uh, American Homes for Rent, First Key, these companies coming in and buying almost every single starter home they could find, jacking rents up as much as possible in limiting the supply. And then in 2020, when we had the quantitative easing and rates went to zero, that just pushed the bubble way higher and we had all these relocations which justified those higher rents and the builders went crazy and they started building as much communities as possible. But they didn't stop when the demand slowed. And this chart really shows when the demand slowed and the relocation stopped.

So we had this massive boom again caused by the Federal Reserve, not because of necessarily supply and demand, just because the numbers made sense at the time to purchase and get the levered returns on real estate. Even though real estate is a very challenging asset class to actually manage these physical assets and have the teams in place to do the maintenance, the leasing, and make the tenants happy across the board. Now, for those who have already purchased and they've been buying from 2020 to 2025, it is brutal because we had this huge spike in rent rates and that's where everybody underwrote to is like, "Oh, rents are always going to go up 2 to 3 to 4%." Well, not so fast when the when the rates went up and there became more supply on the market because people stopped purchasing. We started seeing now that rents are actually coming down across the board down 1% in their and this comes from apartment list month overmonth rent growth.

We are starting to see every single month basically I think it's 19 consecutive months where rents are actually coming down across the board in the United States. This is one chart from apartment list. There's other charts out there as well. But the rents have been struggling since 2020.

And a lot of the underwriting again, they assume a 3 to 4% growth rate in their uh rental increases. And that's a huge problem because their model is thrown off. And not only are rental rates declining, right? So you have a massive supply of rental rates declining, but people who are already in their rentals are now making late payments.

So it's even more difficult if you're a landlord. You have less and less people who are making payments on time or making payments at all. And so we saw this jump recently in August 2025, late rental payments for all property types, rental payments to independent operating landlords, right? So this is not for apartments, this is for single family rentals.

This comes from uh Chandan Economics. So the rental rates are declining and also they're having more late payments. So this is like a worst case scenario and it's just the beginning of what's coming. When we look at multif family, this was the chart that came out from apartment list that's been blowing up across the board on the media.

You see that the vacancy index is 7.2%. This is the highest level ever in history of vacancy for apartments. And this is a huge huge problem because a lot of people again they expect for their underwriting that they're going to have at least 95% occupancy. We're even seeing because there's so many new multif family builds here in Jacksonville, they're on every single corner.

We're seeing vacancy rates on some communities, even luxury communities of 50%. Now, what are they doing? They're stuffing those buildings with as many people as humanly possible. Hey, I'll give you three months to move free rent to move in.

If you sign a two-year lease, I'll give you this. I'll give you that. To be able to get people in there, they're cutting their standards to get, you know, worse and worse tenant quality into their luxury buildings because they need to show cash flow for the banks for their refinancing. And so we think we're going to have a huge multif family type of issue just like we're starting to see an office which is you know unheard of the vacancy level in the office but multif family is starting to get hit across the board again because we built so much and the relocations for people coming here stopped and the wages have not kept up with the rent amount.

So people really feel behind and frankly what's happening is people are moving into the same house. They're getting roommates. They're getting two or three or four people to live in one house and that takes away the apartments uh people who live in apartments and it's just it's just too expensive. So, this is another great chart that shows again this 19-month decline in rents, year-over-year rent growth in the United States.

We had this massive runup of rents of almost 17%. And we had this massive bubble and then of course it came right back down once the Fed increased their interest rates. So, the Fed is in control from these charts. Obviously, you can see they're in control of the housing prices.

They're in charge of rent prices. And then in some areas where there's massive speculation, there's nothing they can do. It gets overbuilt. The demand stops and all of a sudden you have some sort of crisis for the people specifically that bought in those vintage years, right?

So if you bought a rental property thinking that things are going to continue moving up in 22 or even 23, you're underwater. And frankly, we're seeing people who are underwater all the way back in 2019 because we're seeing taxes go up, insurance go up, cost of repairs go up. You you don't have a brand new house, you're going to have a lot of issues that are going to come up that you didn't expect, maybe you didn't plan for. And these first-time landlords that are pushed by these large media companies, they get underwater very quickly.

And real estate's not a liquid asset. So, it's not like a stock where you can just sell it and call it a day. And I Oops, I made the mistake. You have a tenant in there, you're going to have to sell it.

You're going to have to hire an agent. Roundtrip buying and selling a piece of real estate costs about 10%. So, it can get really pricey across the board and your levered return. So you could definitely lose a ton of money on real estate if you buy at the wrong time.

And so here's the a chart that from apartment list as well. It says the median rent for all all room sizes basically of the house. It's come down, right? So we had the 22 peak and then it it goes through a cycle.

Of course during busy season it rents better than slow season. Right now slow season. So we're we're slowly seeing a trend down. Who knows what'll happen next.

My guess is that the Fed will come out next year year and do some sort of quantitative easing and just hand just push a lot of liquidity into the system. Maybe the Congress will start handing out checks again to people to to keep the economy going. Who knows? All I know is that the government does not have the political will to let this reset.

So, it's going to be a battle between the Fed just, you know, pumping si, you know, cash into the system and the consumer being completely maxed out. And so we might not see as drastic of a change in a short period of time, you know, a year or two, maybe it's going to take five to 10 years for this really to play out where the supply and demand because the Fed's going to continue to step in and manipulate the system as much as humanly possible. But ultimately, no matter what the way you're looking at this is, we are starting to reset after this massive runup. So look at that.

I mean, you're talking about uh 1150 going to 1350, you know, within a very short period of time. That it's it's very crazy. And the other factor you need to take into account with if you're a landlord is it's taking longer to rent the unit. So this is the median time in the United States here locally we're seeing rentals sit for 3 to four months.

Then the landlord gets upset and says, "Hey, why can't you rent my property out?" And you're saying it's too high. You need to cut the price by $500 a month. They say, "Well, I'm underwater." Well, too bad. Like if you want to rent it out, this what it's going to take.

You have like 30 other competing properties that are in the area and new construction communities that are doing all these promos. You're going to have to compete with this other inventory out there. This is not what it was like in 21 and 2020. This is a new market and that vacancy can absolutely crush your returns as an investor.

So, if you're an investor right now, you have to be extremely careful on what you purchase in the rent amount and the amount of inventory that's around that area, especially new construction here. If you're in the sunb belt. So, look, the areas that we saw that had the massive growth are the areas that we're now seeing have the massive decline. Now, when you look at this, there's areas in the north in the west that are still doing very well.

Look at Rhode Island. Like, their rent amounts are continuing to move up. They have limited supply. They had a lot of people relocate out in 2020 and now they relocate back because maybe they didn't like where they came from or they're getting returned to office and they move back to where they came from.

We're seeing a lot of that out of Florida. And so these areas that had the massive speculation over here, Austin, Texas, Denver, New Orleans, Arizona, right? San Antonio, uh, Las Vegas, Tampa, these areas, Raleigh, Dallas, these areas had massive, massive booms in price and rent amounts are now the ones that are coming down the most. Of course, this makes sense.

Areas in Florida, Texas, and other boom cities, they just go up and then they're going to come right back down because the demand has just slowed. And the builders, again, I think the builders just went crazy here. They tried to build as much as humanly possible, but we're going to continue to see this pain. It's not again going to be a pain that's happening overnight or within one year.

It takes a series of years for this to play out, but this is start this is just the start of what we could see of a further decline. And at some point, there will be a lot of fear in the market and people will just capitulate and sell their rentals. And I think we're going to probably see that by the end of next year where people are saying, "I can't get the rent amount I want. You know what?

Let's just cut our losses and sell it and they're going to try to fire." It's all going to come on the market next year because we're seeing the rage quitting happen at a record rate right now where people get frustrated. They can't sell the house that they want uh want to sell it for. They try to turn it into rental. They can't rent it for the price they want.

And then they put it back on the market. Okay, let's try next busy season. And then they try to sell it again. And then they eventually capitulate and reduce their price.

Once that price is set as the new floor, it, you know, everybody's going to be chasing that price down. And that's how we expect it to go. Unless we have some massive demand that magically happens, which even Fanny May says we have to get interest rates all the way down to like 2.65% to be able to get buyers back into this market to make it comparable with 2019 levels of affordability. So, look at this chart.

This is really interesting one. Year-over-year rent change on the US metro areas. You can see you blue is where it's negative. The red is where it's positive.

You can see the sunb belt is really struggling. Not every area. There are some counties that are doing a little bit better. But you can see that Austin, Texas is the epicenter of all of this.

And you can see that South Florida is also really hurting there on the coast. So again, the areas that went up the most, that had the most relocations, that had the most amount of speculation in it, are now the areas that are coming down the most. And there's areas that aren't impacted at all. And the rents actually are continuing to move up.

But let's dig into Austin because Austin is the people I talked to there are like terrified. There's a 15% drop in rents from the peak of August 2022. Now, I can tell you here and this only goes October 24. This is a year behind on this data.

And I can tell you it's worse now than it was just a year ago. And in Jacksonville, we're down. I know that stats out there will show you we're down about five or six or 8%. We're down about double the amount of those estimates from what I can see just by logging into MLS and looking at what we had last year versus this year for a similar type of product.

That is a massive decline that again these investors did not anticipate we would have these declines. On top of that, you have the rising taxes, you have the rising insurance, you have the rising repairs and all of this combined where these properties are no longer cash flowing. It makes no sense to own them. And I think this area, look at how much it came up.

1,200 to,600. The more it goes up, the more it's going to come down. That's the case that we're seeing. So, this is uh the conclusion from that apartment list study that came out.

All of our indicators are pointing towards ongoing sluggishness in the multif family rental market. Rent prices are down and the vacancy rate is at all-time highs. As construction slows further during the tail end of this year into 26, rent prices and occupancy should begin to stabilize. This is true.

However, in Jacksonville, we still have thousands and thousands of units coming on that have to be finished that aren't even added to the supply today and so that'll definitely have an impact and a return to tighter market conditions remains on the horizon. That said, supply boom still has a bit of runway remaining and the demand outlook has begun to appear weaker amid a shaky labor market. Absolutely true. If we start to see the mark labor market start to crack, we will see people start moving in with each other and instead of occupying multiple properties, they're going to occupy one with maybe six people living in in one house versus it being spread out and that will absolutely crush these markets.

So these factors could lengthen the time that takes for the market to metabolize the recent growth in in the rental stock. So I agree with this analysis and I would just hedge it with saying it depends on where you are and how close you are to new construction for multif family and for single family. So when we look at just widespread across the board, why are rents declining? Increased supply, weaker demand, and a seasonal slowdown.

Of course, this time of year, it's much more difficult to rent your house out during the holidays. The best months to rent that I've seen, and I've been a property manager, is usually April, May, June, July, and August. And if you're in an area with a bunch of snow, it's really hard during the the snow season to be able to rent it. So, you want it to be obviously during the summer or spring.

So, look, this is where the prices have exploded. So, not rent prices, but just normal prices over the last 40 years, prices have gone up, but wages have not gone up as much as prices. This is why we're seeing just across the board, even with the rent prices, is just not keeping up enough. It becomes more and more of your paycheck.

There's studies out there that show that 35 to 45% of people's paycheck is just going to their shelter cost, including their rent payment in their mortgage payment, there's nothing left to live on. There's no savings that can happen. So, at a certain point, if the rents continue to just move up every single year, people are just going to have to downsize into cheaper apartments. And so, that's actually what we're starting to see.

There's a but there's a lot of luxury that apartments built here that will give you massive deals. So, renters, you have the power right now. You can you can go around and negotiate with your current landlord or switch locations and and really negotiate. And I promise you, if you're a good tenant, you pay on time.

They are going to want to hold on to you. And look at this. This is an crazy map of Jacksonville, Florida. You can't even see that Jacksonville is covered up.

This is the active listings that are currently available in MLS. If people can't sell their house, they become the accidental landlord. They try to rent it, but the math is not making sense. This is a I'm going to give you a behind the-scenes picture of what I've been texting with one of the top property managers in the area because it is across the board and nobody's talking about this by the way.

Nobody in the media is talking about this. Real estate agents won't talk about it. Property managers won't talk about it because it's bad for their business. But this is what's actually going on behind the scenes.

We are seeing it everywhere. This is we're just talking about this is like insane. We're seeing all of these issues. We're seeing it everywhere.

Owner wants 500 more a month than the market rents just to break even, right? The market doesn't care what your break even is. Sell at a loss. Sell at a loss or rent at a loss.

Either way, you're going to lose. It's not going to get better. This person thinks it's going to get a lot worse. And this is a big player in the rental market.

Our comps who promise this we can get this price to the contract. The owner sits on the property for 5 months and ends up leasing it exactly what we told them. Losing four to five months of rental income. This is where we're talking about the the vacancy that's coming up.

Every call for people who bought uh for in the last four years is I'm underwater. Yeah, because you bought at the peak of the bubble during the hype years and now you're going to pay the pay the price for it. So, it's sad to see. I hate to see these investors make this mistake and have and not have a lot of options, but we're starting to see this more and more.

And frankly, my opinion is and this is what I would do. You do whatever you need to do. I sold all my rentals already because I saw this coming. I have access to the data through the companies that I'm involved with and that I own.

And we can see around the corner a little bit by seeing what where the demand is and where it's turning off. Even just, for example, buying a bunch of Zillow leads and understanding how many people are inquiring this month, how many people are are looking? What if we have a perfect product over here, are there a lot of people clicking and and applying? Those are huge indicators that we've seen, and we communicate this to our landlords.

And I get it. If you're a landlord and you're an investor in a property and you can't get the rent rate you want, you're going to lose. There's nothing you we can do. We can't force people to pay the rent amount.

They have a ton of options. You need to be absolutely realistic today on what you're going to rent the property out for or you could get really in a bad situation next year. Imagine another 10% decline in prices in rent prices. What would that do to your model then?

How much less would you have to sell your house for then? So, I think timing is is really important. And this is how it starts, right? You have active listings starting to move up.

We went from 2,000 active listings to 12,000 locally. And each month there's more little bit more new listings. Little bit more new listings than there are sold listings. Same thing with the rental market.

And by the way, 50% of the rental market isn't even listed on Zillow. It's offline stuff. So, you don't actually have a full picture of how bad the rental market is. We can just look at about a chunk of the market to see what's going on.

But this is this is absolutely crazy. And the reason why active listings are falling is again people are getting upset and they're just taking they're ripping their house off of the market. The rage quitting that we're seeing. And so we expect this to continue and there's going to be like a ton more inventory that comes on the market next year and I expect that rents and prices will decline next year.

I'd love to hear from you on what you're seeing in your me market. Are rents coming down? Are prices coming down? If you're in the sunb belt, what are you seeing?

If you're a property manager, if you're a real estate agent, let us know. I want to hear what your predictions are for 2026. How far down will they go? And when you're talking to these sellers, what options are you giving them if they can't rent and they and it doesn't make sense and they're underwater?

Let us know. We'd love to hear from you. As always, you can subscribe to my Substack down below. And uh you know, I look forward to hearing from you.

We love getting to your comments and that makes us better and stronger every time. We learn from you guys as well across the board. And we're learning very closely how micro niche each individual market is even in the same state. So, there's certain areas of each state that are doing well.

There's certain areas that are doing bad. But I can tell you the areas right now that are doing the absolute worst across the board is stuff near construction where the builders just went bananas during the 2020 2021 time frame and just overbuilt completely. Thanks so much for following. See you next week.