Multifamily Fundamentals Do Not Face a Cliff

Apartment fundamentals have bounced back robustly since the recession ended in June 2009. Despite middling economic growth, the national vacancy rate dropped sharply from a peak of 8.0 percent at the end of 2009 to 4.6 percent in the third quarter of 2012. Vacancy rates that are this low have not been observed since late 2001.

Asking and effective rents have risen for 11 consecutive quarters and in many areas have surpassed previous peaks achieved in the third quarter of 2008, before the fall of Lehman Brothers. Landlords face little pressure to offer concessions given how tight rental markets are in most places.

Construction also remains tight, with less than 37,000 units coming online over the last three quarters of 2012. An additional 18,000 units are expected to open their doors in the fourth quarter; that adds up to about 55,000 units for the year, a slight increase from 2011 but well below the 125,000 annual average from 2000 to 2009.

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