Midwest apartment markets are leading the nation in rent growth while Florida sinks further under the weight of a massive new supply of units and slowing demand.

Indianapolis held the No. 1 spot with 6.6% rent growth in February, while Cincinnati remained in second place with a 6.1% gain, trailed by Columbus, Ohio, again coming in third, according to the latest data from CoStar's Apartments.com. Miami fell from fourth to ninth place as some other Sun Belt cities also slid. The only major cities in negative territory in February, Phoenix and Las Vegas, were joined in March by Austin, Texas, and San Francisco.

More than 1 million units under construction, mostly in Sun Belt states, are partly the cause for that region's rent growth slowing or turning negative. There's also economic uncertainty that has “suppressed household formations, and consumer confidence sits at low levels due to high inflation, Fed interest rate hikes and recession fears,” said Jay Lybik, CoStar’s national director of multifamily analytics. 

The ranking of cities with the strongest rent growth are used by commercial real estate owners, investors and lenders as they try to navigate an uncertain economy. Apartments sales slowed to anemic levels as lending costs rose and easing rent growth challenged property valuations. Sellers have been holding off in hopes of better market conditions, while buyers want to pay lower prices they say reflect the slower rent growth.

The national construction pipeline has been above 1 million since last year’s third quarter and at historic levels since the first quarter of 2021. That's when demand accelerated during the pandemic for Sun Belt living with more outdoor activities while coronavirus restrictions were in place.

Construction and the addition of units tamed rent growth that was at 11.4% a year earlier to about 2.5% last month.

Construction in the top four markets has been muted compared to the Sun Belt and a modicum of demand has meant rent growth is falling at a much slower pace than the Sun Belt.

But new supply has put an ever-increasing dent in rent growth in many of the highest-flying markets in the Sun Belt, especially in Florida. Florida experienced the highest domestic in-migration in the country last year with 318,855 people last year to drive rents and home prices higher.

That influx prompted developers to pick up the pace of construction. Miami and Orlando, which were among the top Florida markets for rent growth, are at historic levels for construction along with other Sun Belt areas. Orlando has 26,352 units underway while Miami has 29,753 units getting built, according to CoStar data.

Rent growth in both markets has dropped precipitously over past nine months or so. And the decline steepened from February.

Miami rent growth slowed from 6.8% in December to 3.8% by the end of March. Orlando’s rent growth eased from 5.8% to 2.9% over the same time.

Last May, Apartments.com reported that Orlando’s April rent growth was at 23%, second only to then No. 1 Palm Beach, Florida, at 24%. Palm Beach was at 0.9% rent growth in March. At that time, Midwest markets were nowhere near the top.