Jamie Feldman — Managing Director, Head of REIT Research, Wells Fargo
Great. Thanks for taking the question. I apologize that you went really quickly through the new renewal and blended outlook. Can you just run through those numbers again and maybe just talk us through your level of confidence in each, your cadence on each throughout the quarters, and just where you think, if you think about your markets, where you're most confident and most concerned about hitting those numbers? Thank you.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Yeah. Jamie, this is Tim. I can walk you through that and Clay may have some to add as well. As Clay mentioned, our blended guidance is about 1%-1.5% for 2026. On the renewal side, I mentioned in my comments that we're seeing a little bit above 5% so far this year. So we would expect renewals to be in that 5.25% range and then start to slowly see momentum on the new lease side. You can kind of do the math on the new lease side with those components.
I would say, generally, we expect a normal seasonal curve where we see strength into the summer and then start to moderate into the late summer and fall, but see less of that moderation in late Q3 and in Q4 than we typically do, again, as we get further away from the peak of the supply and expect the demand to solidify as well. So normal seasonality, but less steep declines as we get late in the year. As far as markets, I mentioned a few of those on the prepared comments. We're continuing to see strength out of the markets that have been strong, some of the Carolinas and Virginia, encouraged with what we're seeing out of Atlanta and Dallas. Those are obviously our two largest markets. We continue to see steady progress there, both on the pricing front and the occupancy front.
The year-over-year improvement in Q4 pricing for both of those was significant and two of our highest. I think we'll start to see a little bit of momentum in Tampa. That's one where occupancy has stabilized, and we're expecting to see a decent amount of demand there. But other than that, I think the ones that have been pretty solid for us this year, I expect those to continue to be solid for us in 2026.
Jana Galan — Director, Bank of America
Thank you. Good morning. I was curious if you could comment a little more on the transaction market. We're hearing there's more variance on cap rates between core and value add, and then maybe on your decision to add to the development pipeline rather than buying assets or buying back more stock.
Brad Hill — President and CEO, Mid-America Apartment Communities
Yeah. Thanks. This is Brad. I'll kick that one off. I mean, in terms of the transaction market, it continues to be pretty aggressive on those core assets, as you mentioned. What we looked at in the fourth quarter, we continue to see cap rates in the, call it, a four, six range. In terms of the spread between core and value add, I would say you're probably seeing a 50-75 basis point spread, all depending on, certainly, the markets that the value add's located in, what that upside opportunity looks like. But those can trade somewhere in the 5.25 to, call it, 5.5 range, again, depending on the market that that's located in. But I don't think that spread has changed.
That spread has been there for the last couple of years, so I wouldn't say there's a material change in that at the moment. In terms of our capital allocation, yeah, I mean, development continues to be a big focus of ours. If we can, as I indicated in my comments, when we're in an environment where demand continues to be solid, the supply pipeline over the next few years continues to be muted. We've got the past three years now of starts have been below long-term averages in our region of the country.
This is a good time for us to be able to use our balance sheet capacity to invest in new assets that will deliver into a much stronger operating environment, the development yields that we're still able to achieve today selectively, not on everything that we look at, but on the deals that we move forward with. And we're in the 6%-6.5% range. So we continue to believe that that's a good use of our capital to drive long-term earnings growth out of our portfolio. And in terms of share repurchases, again, we look at all opportunities for capital allocation, whether that's external growth, internal growth, developing, or excuse me, investing in our existing platform. We talked about the redevelopment, repositioning, the Wi-Fi initiatives, various initiatives we have to drive margin expansion opportunities. Those continue to be very, very compelling for us.
And when we look at our opportunity set there, that does leave us with limited capacity for share repurchases. One of the things that we're not really targeting is a big disposition portfolio of properties to dispose of. I mean, we generally like where we're located, and we don't need to reallocate capital between markets. So you're generally not going to see us move forward with a big disposition plan to support a share repurchase. Rather, what we'll do on the disposition side is continue to cycle out of older assets, redeploy that capital into newer assets. And if you look at what we've done over the last five years, we've taken capital off of dispositions. We've earned almost a 20% IRR on those and redeployed them into new assets, driving 1,000 basis points better NOI margins and a 1,500 basis points better after-CapEx NOI margins.
So we think that's the best opportunity for us on dispositions moving forward.
Nick Yulico — Managing Director, Scotiabank
Thanks. Good morning, everyone. So in terms of development, I was hoping you could talk some more about why that you have a focus on development right now when clearly, you have a view there's value creation to be had over time. You're building a higher yield than where you think assets are trading. But from an FFO and accretion growth standpoint, it's not helping right now. I mean, you've talked about slower development lease-up periods. You have an issue like others where capitalized interest benefit is lower than where you're borrowing. So can you just maybe talk about how this makes sense to be picking up development right now if you are having all these near-term FFO impacts because of that?
Brad Hill — President and CEO, Mid-America Apartment Communities
Yeah. Thanks, Nick. This is Brad. Yeah, I think that's a good question, fair question. I think it's important to keep in mind with our development pipeline that we are delivering currently at a time where those particular properties are under more pressure than they ever have been. I mean, keep in mind that if you look at the amount of supply that's delivered on our markets from 2023 to 2025, we delivered five years' worth of supply over a three year period. So those properties are facing much more pressure, which we are seeing right now in terms of their ability to lease up, the velocity of their lease up, and certainly the use of concessions right now. But that's temporary. If you look at the lease-over-lease rents we're getting on renewals on our new lease-up properties, we're getting low double-digit returns.
So the concessions that we're offering are burning off. If you look at the recurring rents that are in place on those development projects right now, they're 2% above pro forma. So again, this is a temporary issue with our developments. If you look at what we've developed over the last five years, we have delivered developments on average that have exceeded our underwritten yields by 90 basis points. So you're right. We're under pressure right now on that development pipeline. And we do think that that's temporary. And as the market firms and concessions burn off, we will, as Tim mentioned in his comments, capture the value proposition associated with those. And then in terms of starting new developments today, they'll be delivering in 2028, 2029.
As I mentioned in my comments, we've had three years now of below long-term average supply in our starts in our market, which will support a stronger operating environment when those new developments come online. We very much believe in the merits of continuing to allocate capital to developments despite the pressure that we're under currently.
Eric Wolfe — Director, Citi
Hey. Thanks and good morning. You mentioned that renewals are being accepted above 5% so far this year. Could you just talk about what the dollar premium is on renewals versus new leases right now, how that premium compares versus history, and just any thoughts on how sustainable you think this 5% renewal rate is?
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Yeah. This is Tim. As far as the gap, Q4, it was around $180-$185 or so new leases versus renewals. Now, that's after the renewal increase, and the renewal increase is about $80 or so. That's certainly higher than our long-term averages, but not too much different. Q4 is when it always tends to gap out as we see, obviously, more moderation in new lease rates and traffic patterns, that sort of thing. So if I look back to the last couple of Q4s, that's not too much different than what we've seen there. But we've now seen that. There's been eight or nine quarters now where it's been a little bit wider than normal, but still been able to maintain the growth that we've achieved on renewals. Now, I think there's a lot of reasons for that. We've talked about this in the past.
I mean, I think there is a cost. There's a hassle to moving as our residents get a little bit older. The cost of that and the willingness to go through that hassle and spend that money and take that time, I think, is people are less willing to do that with the resident base that we have. And we're very thoughtful of how we go about our renewal increases. It's based on where our residents are relative to market, and we scale that higher or lower based on that. And we're looking at it on a very strategic basis. And there's a customer service factor there as well. Brad mentioned the Google scores that we have, which are highest in the sector as a customer service component.
I think when you factor all those things in, the service you're getting, the cost, the hassle, everything that goes into moving, it's just not worth it for a lot of our residents when they consider the value they're getting with us. And particularly in this environment, when you think about the concessions on lease-ups and some of the eight to 10 weeks free that they're seeing, that's a short-term thing. And you're going to get that big increase when you try to renew if you are willing to move. So we expect we've got visibility really out into April now and seeing consistent pay rates and consistent performance on renewals. So still confident, comfortable about where we are in the renewal side.
Speaker — Analyst
Hi. Thanks. This is Amy. I'm with Michael. What gives you the confidence that you can see an acceleration in new lease through and maybe a little bit past the typical lease season given the softer macro? I know you mentioned some tailwinds, but within your markets, what are you seeing in terms of job growth that really gives you confidence that the remaining supply can be absorbed and rents can accelerate? Maybe if you could talk about the new lease growth from trough to peak and how that would compare to historical. Thank you.
Brad Hill — President and CEO, Mid-America Apartment Communities
Yeah. Amy, this is Brad. I'll kick off, and Tim can certainly give you some details. But I think it's the pace of recovery and the expectation for a recovery to accelerate this year for us is really, as I mentioned in my comments, really anchored in the fact that we do think some of the headwinds that we had last year are a little bit less than what we or less this year than what we expected last year. And we're seeing the momentum. If you look at our fundamentals, as we talked about, they're improving. The operating fundamentals are. Now, it takes time for that to make its way into the revenue and earnings portion as the rent roll turns. But we've had four straight quarters now of blends improving year-over-year, which really indicates that we're turning the corner. Certainly, less uncertainty, as I talked about.
And then I think as you look out into the next year and the cadence of new deliveries declining this year where they'll be down by more than 60% from the peak and down 35% year-over-year. And then I think, as Tim mentioned earlier, with the backdrop of market-level occupancies continuing to firm up in less units and lease up, the sustained demand that we're seeing across our portfolio right now should have a more pronounced impact on fundamentals. And certainly, as we get into and particularly on the new lease rate side, and as we get into the spring and summer leasing season, we would expect that to continue to manifest itself to a larger degree.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Yeah. And I'll just add one point.
I mean, I think important to keep in mind on the new lease side is typically in Q4 and Q1, we historically see negative new lease rates. Even in a good environment, even in a more historically favorable supply-demand environment, you see negative new lease rates in those two quarters just from normal seasonality, from traffic declining. So that's not unusual to see that. But we would expect some good acceleration, as I mentioned, into the summer and then start to moderate into the fall. But all the things Brad mentioned and think about it when we get to the back half of 2026, how far we are from the peak, continuing to see those units absorbed. We think the demand picture will continue to solidify.
All the various factors in our region of the country, whether it's job growth, migration, household formation, population growth, the health of our renters in terms of income, rent to income, are all extremely strong, particularly compared to other areas of the country. So all of those factors are combined to give us the confidence that we think 2026 looks better than 2025.
Haendel St. Juste — Managing Director, Mizuho
Hey, guys. Just wanted to come back to the point on blends one more time. Just doing a quick math by our numbers, it looks like there's about a 200 basis point ramp implied into the back half of the year versus the first half, which is similar to what you saw or what we saw at this point last year, and you subsequently had to cut a few times. So first, I guess, is my math correct? And it sounds like, secondly, that it's a little bit of lower supply. You have some optimism in the demand picture here. But what about turnover? I'm curious kind of what you're factoring as well for turnover into that math. Thanks.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Okay. No, I'll hit that last point. I might talk a little bit about the first part. As far as turnover, we're expecting pretty consistent turnover. There's nothing that suggests that we think it'll pick up. So we've effectively dialed in consistent turnover with what we did last year. So certainly, the renewal performance and the impact of renewals versus new leases is helping in that blend as we expect turnover to stay low. We're not necessarily dialing it in to be lower, but not dialing in to be any higher either.
Brad Hill — President and CEO, Mid-America Apartment Communities
Yeah. And Haendel, just on the new lease side, I mean, as far as kind of the pace that that plays itself out to be, I mean, as Tim's mentioned earlier, it's increasing over the first half of the year and then subsiding over the back half of the year, kind of following the typical seasonal curves. But we do expect there to be continued improvement versus what we've seen in 2024. And so as that wraps up over the course of the year, we see that that playing itself out into those blended rates that we were describing.
Brad Heffern — Director, RBC Capital Markets
Yeah. Hey, everybody. Thanks. Can you talk through what the path is back to positive new lease growth? Obviously, it was originally expected in mid 2025. Doesn't look like the guidance would suggest that we would see it in 2026. And then if renewals are a little higher than normal, I don't think you've done anything in the five since 2023. So it feels like that would put pressure on new lease in 2027 as well. So I'm just wondering your best guess on when we would see positive new lease growth and then when new lease growth in general could kind of go back to normal.
Brad Hill — President and CEO, Mid-America Apartment Communities
Well, I'm not going to put a target on going to positive new lease growth. I mean, we don't necessarily have that dialed into our expectations, as you noted, in 2026. We do expect it to continue to accelerate from where we are now and then, as mentioned, seeing the steady renewals. But I think as we get into 2027, I mean, I think one thing to be clear about on what we dialed in 2026, because of the acceleration of new lease rates, and I mentioned in my comments, less of the normal seasonality as we get into August, September, and beyond, more of that impacting new lease rates is going to impact 2027 more so on the revenue side than 2026 because of it being a little more backloaded. And so part of that leads into where we expect 2027 to be.
Again, we'll be even further from the supply peak. Consistently starts or continuing to go down, we think demand will be solidified. So as we get into 2027, I think that's when you see real sustained momentum and start to see potentially where we get into some of those positive new lease rate ranges.
John Kim — Managing Director, BMO
Thank you. I wanted to follow up on your disposition guidance of $250 million, which is following a year in which you had sold just a couple of assets. But just given the strong demand from institutions for your product, I'm wondering what's holding you back from selling more into the strength?
Brad Hill — President and CEO, Mid-America Apartment Communities
Yeah. Hey, John. This is Brad. I mean, I think what's holding us back from selling more is, one, what we've always talked about. We want to protect the earnings quality and capability of our portfolio without introducing a lot of volatility into our earnings performance. And I think for us to go out and sell a large part of our portfolio, I think, could potentially introduce some earnings volatility. Second, we like where we're located. We like the diversification of our portfolio in both large and mid-tier markets. And there's really not a portion of our portfolio that we are really targeting moving out of and reallocating that capital to another region of the country. So we don't really have the need to do that. And if you look, again, as I said earlier, what we've been selling over the last couple of years, it's 30 year-old properties.
I think that really fits nicely into our overall strategy of improving the earnings quality of the portfolio versus going out and selling a big portion of our portfolio and trying to determine what to do with that capital. I think you also have to remember that the fact that we are selling assets that are 30 years old, the taxable gains associated with that are sizable. For us to really protect that from having to pay some type of tax on that, we want to be able to 1031 exchange that. That's harder to do at a large scale in this market without paying cap rates that we think are very aggressive at the 4.5% range or so. We think our opportunity is better to be measured and to deploy capital into other avenues.
Austin Wurschmidt — Analyst, KeyBanc Capital Markets
Hey. Good morning, everybody. Recognize it's still pretty early in the year, but just wondering if the pace of improvement in new lease rate growth from the fourth quarter into January, February, and any future visibility you have into future months, how does that compare versus last year? Do you expect just that gap or improvement to just gradually widen through the year? Is that what's in that new lease rate growth assumption? Thanks.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Yeah. Awesome. This is Tim. I think you characterized it well in the last part of your question. We would expect that variance, if you will, to prior year to continue to get a little bit wider as we get later in the year for all the reasons we've talked about with moderating supply. Right now, particularly on the blended side, we're seeing we would expect pricing in Q1 blended to be better than what it was this time last year. And then we start to see it accelerate from there. So far, as expected. And as I mentioned, I think the way you characterize it is the right way to think about it.
Rich Hightower — Managing Director, Barclays
Hey, guys. Thanks for taking the question. Just to maybe follow on Austin and even Jamie earlier, just to confirm, you guys wouldn't want to put a number on what new lease growth in the first quarter is going to be. And that's not even my real question. My real question is just on share repurchases. It seems like the philosophy, it was always there as a possibility, but maybe it changed later in the fourth quarter. And just wondering what the math around sort of sources and uses, how that changed kind of later in the fourth quarter that led to repurchases for the first time in a long time. Thank you.
Brad Hill — President and CEO, Mid-America Apartment Communities
Hey, Rich. This is Brad. I'll pick that off, and others can jump in if they need to. I wouldn't say it's been a material change in terms of our outlook there. I mean, honestly, we've always had the position that if our shares traded at a persistent and sizable discount to our underlying value, and we felt that investing in our existing shares provided an opportunity to drive earnings growth and value proposition for our shareholders, then we would do that. And I'd say what's unique right now versus historical times is that we're trading at a sizable discount persistently. We really have not done that, if you go back and look at our history, in a long, long time, hence why we haven't repurchased shares since 2001.
So it's not a position that we have found ourselves in historically and certainly think it's unique given the supply pressures that we are under right now that are dissipating. So we do think that it is a temporary item given where we continue to see private market pricing relative to the public market. So as I mentioned, we have a limited appetite to do that. And so we have an authorization that's in place, remains in place. And so if we continue to find that to be the case, and we think that's the best opportunity for our capital to drive long-term shareholder returns, we'll continue to monitor that and execute in that way.
Steve Sakwa — Senior Managing Director, Evercore ISI
Yeah. Thanks. Good morning. I just was curious if you had sort of an overarching kind of macro view that you're laying on top of your expectations. I mean, you're talking very positively about renewal pricing. Obviously, job growth kind of slowed in the back half of last year. And I'm just curious if there's an underpinning or kind of broad assumption that you guys have about job growth kind of in either absolute terms or percentage growth because obviously, job growth slowed pretty meaningfully from 2024 into 2025. Thanks.
Brad Hill — President and CEO, Mid-America Apartment Communities
Steve, this is Brad. I'll kick off, and Tim can add any details if he wants. I would say the broad view is that, as I mentioned in my comments, that GDP continues to be relatively strong this year. I think from a job growth number perspective, what we're looking at, the numbers we're looking at for our markets showed absolute job growth going up slightly versus last year. The other demand metrics that we're looking at continue to remain positive, as Tim mentioned earlier. Household formation, population growth, and migration trends continue to be positive in our region of the country. And then just wage growth. We continue to see very strong wage growth in our resident base supporting declining rent-to-income ratios.
So I think all of those things really support just the broad view that we have that things on the demand side are holding up quite well in our region of the country and should continue to hold up quite well this year with the supply-demand dynamics improving as we progress through the year.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Just one thing I'll add, just put some numbers on it. We're projecting somewhere in the 340,000, 350,000 jobs in our markets in 2026. And then about half of that in terms of number of completions. So you think about that job-to-completion ratio certainly improving in a lot better position than we've been in the last few years.
Linda Tsai — Analyst, Jefferies
Thank you. For the markets where you're seeing higher concessions, where would you expect to see the concessions burn off the soonest? And then alternatively, markets where the concessions might persist?
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Yeah. This is Tim. I mean, I would say at a broad level, concessions have been pretty consistent. There's probably about 2/3 or so of our direct comps are offering concessions, and they're averaging somewhere in the five week range. That's kind of a broad assessment, which is pretty consistent with what it's been. Some of the lease-up properties, as we mentioned, if there's a lot of lease-ups, have been a little bit higher, more in the eight to 10 weeks. We're starting to we've seen a little bit of increase in downtown Nashville, a little bit in Raleigh and Charlotte. Those are ones where we've seen concessions pick up a little bit. We've seen them drop a little bit in Tampa and some in Houston. We've seen a lot of good stability in Phoenix, where I could see it stabilize, and we're not seeing the concession pick up.
But broadly, where we've seen some improvement over the last few quarters is a couple of markets I mentioned earlier, Dallas and Atlanta, and really starting to see those inner-loop and urban areas across the portfolio work through that level of supply. So we've seen concessions in some of the more urban areas come down, which, again, is encouraging. They've seen a lot of supply. So broadly, concessions pretty consistent. And then it's some increasing, some decreasing depending on certain pockets and certain markets.
Alexander Goldfarb — Managing Director, Piper Sandler
Hey. Morning down there. Just thinking about concessions, is there a risk of all the supply that was delivered the past two years presumably had a lot of concessions in that, and those existing renters got the benefit of whatever, one, two, three months free? As those leases roll and those renters face market rents, are you expecting a lot of churn where, once again, even though supply is coming down, there's suddenly a lot of competitive supply, if you will, because those units now are looking for full-rate renters versus the concessionary ones that were currently in the lease-up? I'm just trying to understand how the first-year anniversary of all that supply rolls, how that's going to impact you guys and the overall market.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Yeah. Alex, this is Tim. I mean, certainly relative to where we've been over the last couple of years, I don't consider that to be too much of a risk because it still comes down to just how many units are out there that are available. We think there's probably 110,000, 120,000 less units in lease-up in our markets than there were at the peak. And then you combine the lower turnover, that's helping as well, where there's just fewer units of existing assets. So I don't consider that. I think it still just comes down to more of a supply-demand picture of how many units in lease-up, and that really drives it more than anything else. I think where it has helped us more, honestly, is on the retention side.
Where people knowing those concessions are going to burn off, I think that's helped us more on the renewal side, but we don't see that as a real risk.
Buck Horne — Managing Director, Raymond James
Hey. Thanks. Good morning, guys. I was wondering if you could help us stratify maybe the recent performance between your Class A units versus Class B. And however you want to describe it, new lease rates, occupancy, any sort of metric between A's and B's. And I'm just wondering if we're starting to see any sort of incremental pressure from kind of the vacancy increases in the Class C units, if that's starting to filter upwards or not.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Hey, Buck. This is Tim. As far as A, B, and you can think about A, B, or you can think about urban-suburban, depending on how you want to define it. But the way we define A and B, I haven't seen a real differentiation of performance there. But I mentioned this a little bit earlier. Where we have started to see some differentiation over the last couple of quarters is more of the urban versus suburban, more of the central business district and urban areas, particularly. And we don't have a ton of that, but we have a fair amount in Dallas and Atlanta. And we've seen that performance start to differentiate both on the occupancy side and the pricing side. We're seeing pricing about 40 basis points better on blended pricing and probably 10 basis points or so higher occupancy.
I think that's encouraging given where supply was occurring in those markets, but not a big mix on the A, B side.
Mason Guell — Equity Research Associate, Baird
Hey. Thanks. Good morning, everyone. On the acquisition side, are you seeing more opportunities to acquire lease-ups with the cycle taking longer to turn?
Brad Hill — President and CEO, Mid-America Apartment Communities
Yeah. This is Brad. I wouldn't say that we're seeing more opportunities. I mean, certainly, there are a lot of lease-ups that are out there right now. But honestly, I think we've seen less lease-ups actually being marketed than what we have historically. And I think that's just because the valuation is more impacted right now because there's just more uncertainty about the timing of the lease-up, the roll-off of concessions, and things of that nature. So I think from a buyer's perspective, there's a little bit more hesitancy on lease-ups versus a stabilized. And so therefore, the valuation could be impacted. So sellers are really holding on to those assets a little bit longer right now, trying to lease those up before they really bring them to market.
So there's lease-ups out there that certainly be unmarketed, but I think there's less of those today than there have been in the years past.
Annie Zhang — Associate, Green Street
Hi. Good morning. Thanks for taking my question. Could you share how renewal and new lease rates in Atlanta have trended late last year and into early this year?
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Yeah. As far as Atlanta, and I touched on this a little bit earlier, we've continued to see pretty good performance, continually increasing performance both in terms of really blended pricing and occupancy. If I look at 2025 full-year blended pricing for Atlanta versus where it was in 2024, it was about 260 basis points higher blended pricing for the full year in 2025 and occupancy about 70 basis points higher for the full year. So continue to see steady improvement there. When I isolated to just the fourth quarter, saw that improvement as well. So that's the market that I've talked about that we're starting to see some stability from. We've seen delinquency go down to just about the portfolio average as well. So don't see any concerns there. And on a relative basis, Atlanta has had less supply than some of our markets.
Broadly, pretty encouraged with what we've seen from Atlanta.
Alexander Kim — Equity Research Senior Associate, Zelman & Associates
Good morning. Thanks for taking my question. I wanted to dive into the transaction market a bit more here. Pricing power overall has been relatively soft, particularly on the new move-in side. And at the same time, you cited market cap rates in the four to six range with investor demand still obvious. Can you talk about what you're seeing in the transaction market for a stabilized product, I guess, and what you expect moving forward for transaction volumes with this particular dynamic in play?
Brad Hill — President and CEO, Mid-America Apartment Communities
Yeah. I mean, we continue to see very robust investor appetite for assets in our region of the country. I think the volume of properties that have come to market have increased steadily during 2025, certainly as interest rates stabilized and were more attractive for folks. So I do think that that is likely to continue in 2026. I think the appetite for properties in our region of the country will continue to be very, very strong. There's a lot of capital out there. Interest rate spreads have decreased. Overall, the cost of capital has decreased. So I do think that the transaction market could be pretty healthy with healthy cap rates as we go forward. I don't really see those changing at this point.
I think, as I mentioned a moment ago, I think from an underwriting perspective, there's a little bit more uncertainty or has been for the past year of what happens on the new lease rate side. And since these lease-ups are generally leasing predominantly or for the most part, at least in the first year, to new lease rates, there's more pressure there. So then it comes down to the ability to burn those concessions off. So I think the market is certainly optimistic about what that looks like going forward and hence the low cap rates. And so I see the transaction market picking up in activity as we go through 2026.
Haendel St. Juste — Managing Director, Mizuho
Hey, guys. Thanks for taking the follow-up. I might have missed it, but can you tell us what the new lease rate was for January specifically? And then would you also comment or can you comment on the pending settlement for the RealPage multi-district lawsuit and then maybe remind us what other litigation there is on that front outstanding? Thanks.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Haendel, this is Tim. I'll answer the first part. We're not going to get into individual months on the new lease side. It's just pretty granular and a small population. But I will say I think when you think about new lease pricing compared to last year, we expect a smallest delta between those two in Q1 and then to get larger for all the reasons we've talked about. And then blended basis too broadly, we expect we would have better pricing in Q1 versus what we did this time last year.
Rob DelPriore — EVP, Chief Administrative Officer & General Counsel, Mid-America Apartment Communities
Hey, this is Rob. On the RealPage settlement, I think, I mean, first and foremost, I would say the settlement is no admission of wrongdoing or liability, and we remain confident that we've acted lawfully and responsibly. Secondly, it does not require any material changes to how we operate the business. The prospective commitments are all ones that we believe are consistent with how we conduct operations today. So we don't really expect any significant disruptions there. Then finally, it really is just about removing distraction and uncertainty in a complex and evolving legal environment where this is really an attack on the entire industry and not just MAA. The resolution did allow us to eliminate significant cost and complexity and distraction of the continued and prolonged litigation and keep the focus of leadership where we really want it, which is on residents, operations, and value creation.
And then the two ongoing attorney general matters that are disclosed in our financial reports are still continuing, and we will continue to defend those.
Julien Blouin — VP, Goldman Sachs
Yeah. Thank you for taking my question. I just wanted to check on maybe just the trend of absorption volumes in your markets. It has seemed to maybe normalize somewhat in fourth quarter, certainly lower than it was in the fourth quarter of 2024. Do you worry at all that maybe absorption is starting to slow amidst the job environment that Steve alluded to and maybe in this sort of slower migration environment? You're still dealing with elevated levels of vacant units in your markets, but just wondering how you feel about absorption.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
Yeah. Julien, this is Tim. We did see absorption slow a little bit in the back part of the year and in the Q4, but not really surprisingly. I mean, one, just there's a seasonal component to that that is not unexpected. And then frankly, there's just as supply and starts have continued as we've continued further from that peak, we would expect absorption to go down. There's just fewer units to be absorbed. So we didn't necessarily need to stay at those extremely high levels that we've seen over the last few quarters. But as we look forward, just given the fact that there's so many fewer units in lease-up than there were 12, 15, 18 months ago, continued steady demand scenario, no sign of supply picking back up, we would expect absorption to be pretty consistent, demand to be pretty consistent, and not concerned overall on that front.
Brad Hill — President and CEO, Mid-America Apartment Communities
Julien, this is Brad, I'll just add one thing to that. As Tim mentioned, as new deliveries continue to decline, the absorption numbers, the way they're calculated, are going to by nature continue to decline. And so one of the things that we're also focused on is what do market-level occupancies look like in our markets? And certainly, we look at that on a total basis as well as just the stabilized occupancy. And as Tim mentioned, I think in his opening comments, I mean, we've seen significant improvement in those market-level occupancies over the past year. And the numbers continue to show that the lease-ups that are in the market continue to be filled up, and therefore, the market-level occupancies are firming, which is one of the components of our belief of the strengthening performance throughout this year. So occupancies appear to continue to improve.
Tim Argo — Executive VP and Chief Strategy and Analysis Officer, Mid-America Apartment Communities
All right. Thanks for joining the call today. If you've got any follow-ups, don't hesitate to reach out. Thanks.