For the third quarter, buildings with five or more units had an average vacancy rate of 10.7%, down 40 basis points from the prior quarter but up 30 basis points from a year ago. When all types of rental units--including single-family rental homes--are factored in, the average Q3 vacancy rate came in at 9.9%, down from 10% in Q2 and up 10 basis points from Q3 2007.

Absorption levels are sliding down; in fact, the third quarter rate was the lowest seen in nearly five years. In the US, the absorption rate for new, unfurnished rental apartments completed in the third quarter was 53%, down from 60% in Q2 and 57% in Q3 2007. There were geographic differences. The highest vacancy rates were found in the South--13%--which had a 51% absorption rate. Absorption has remained relatively steady in the region, remaining around 50% for the past year. Vacancy in the West rose to 7.6% in Q3, despite a 63% absorption rate, up 13% from the prior quarter and 12% over last year. The Northeast had Q3 vacancy and absorption rates of 6.7% and 53%, respectively, for the three months between July and September, while the same figures for the Midwest were 10.3% and 44%. Absorption in the Northeast fell considerably --32 points--between the second and third quarters. That figure has been up and down in the Midwest; most recently, it ticked down 34 percentage points from three months ago, but only by 11 points in the past six months, and just three in the past nine months.

A rising minority population is the primary driver behind the growth of new households. In the third quarter, the number of renter households went up by 300,000 to 35.8 million, while the number of owner households rose 200,000 to 75.9 million--not too far off the total for the past few years. Because the total number of households has increased and the homeownership rate has remained steady, many of them are in the rental pool. Consequently, The 35.8 million renter households is 100,000 more than the previous all-time high, set during the first quarter of 2007.

Also, in between the second and third quarters, reports Eisenberg, the number of non-Hispanic white renter households increased by 200,000 to 19.6 million, following a 500,000 increase in the fourth quarter of 2007. Meanwhile, minority renters are growing steadily, from 15.5 million at year-end 2007 to 16.1 million in September.

Asking rents for existing empty units are at or near all-time highs, hitting $719 in Q3, up $33 from midyear and $56 from a year ago. Not surprisingly, the highest median asking rents were in the West and Northeast, followed by the South and Midwest. Middle America was also the only region in the US that did not see rents go up. The median asking rent for new apartments is also at a record high, $1,071 for units delivered between July and September, up $58 from midyear.

"While some of the increase in asking rents may be due to strong demand relative to supply, some may simply reflect changes in the characteristics of the apartments being built," namely, larger unit sizes, although that trend seems to be reversing, says Eisenberg.

Looking ahead, new construction seems to be in check. The US Census Bureau reports 247,000 multifamily starts in October, down 5.7% from September. At the same time, permit issuance declined by 6.4% in October to 218,000--marking the fourth consecutive month decreases. The latest figure is the lowest level that permitting has reached in nearly 15 years.

NAHB projects total 2008 starts on projects with five or more units to be similar to last year, around 280,000 units, but that number should decline by 36% to 173,000 units by the end of next year.