Clarion, a real estate investment advisory firm, suggests in its US Apartment Market 2000-2010 report that 12 million new households will be formed within the next seven years, creating the need for 190,000 new apartments by the end of the decade.

"A difficult economy and low job growth have hit new apartment absorption particularly hard," says Dougal M. Casey, author of the study and head of investment strategy & research at Clarion Partners. "As economic conditions start to improve, we expect absorption rates to return to levels closer to historic norms."

In 2000 and 2001, multifamily construction outpaced demand by 25%, according to the study; however, much of this is attributed to weak economic conditions during that same period, which depressed absorption by 85%. "So, while we would like to see construction ease further, the apartment sector has been struggling more with weakened demand than with out-of-control development, and should begin significant recovery as job growth returns," Casey states.