"Barring a major change in interest rates, we don't see cap rates moving much from where they are now," Lane Schwartz, regional manager of the Los Angeles office of Marcus & Millichap tells Howard. He says that investors continued to view apartments as a reliable investment throughout 2004, as they have for a number of years now, for many of the same reasons enumerated by Hardman: a dearth of new units to compete with the existing stock and housing prices high enough to prevent many people from buying a home. In addition, Schwartz points out, the already modest pace of multifamily construction slowed this year to about 5,400 new units from 5,800 in 2003. The reduction in construction gave owners the opportunity to push rents without a lot of fear that they would lose tenants.

But the market can clearly bear a little construction, as Atlanta pros can attest. According to reporter Alex Finkelstein, the desire for intown living has sparked an unprecedented surge in condominium development there. In fact, construction on at least 2,300 new or converted units with an estimated build-out value of $1 billion have either started or will be breaking ground in the next few weeks.

Even more sluggish markets, such as Dallas, will attempt to shake its doldrums, reports Jennifer Duell. Concessions that have included as much as three months free rent are expected to disappear, or at the very least, diminish. Duell reports that rising interest rates will open the floodgates of new occupants, many of them abandoning their homes for the relatively low cost of apartment dwelling. However, she notes, the slump was so deep that no one should expect it to go way completely.