While the first half of 2008 saw many would-be home buyers opt to rent apartments instead, the trend slowed down as the year progressed and the pace of layoffs rose. More than three-quarters of the positions lost last year occurred in the fourth quarter, he points out. "As renters became more cautious about their employment prospects, shared living arrangements emerged as the preferred option, especially for distressed tenants and recent college graduates living in the most desirable locations," he states. "As the employment sectors responsible for driving the Northern New Jersey's luxury rental housing--financial services and pharmaceuticals--have shed workforce, landlords are reporting a slowdown in leasing activity and resistance to rent increases." Concessions, he adds, have become more common and lease-up at new developments has slowed.

All of this has impacted multifamily vacancy and rental rates. After hitting a low of 2.4% in 2006, the vacancy crept up to 3.1% in 2007, and negative absorption numbers pushed it even higher last year. And while the annual vacancy rate for seven of the past 10 years has been below the area's average for the past decade, 3.9%, Cruz expects the vacancy to continue to tick upward this year as employers shed more jobs.

The good news is that landlords have been able to push rents up in each of the past 10 years. Though rents grew at a slower pace last year than in 2007, when the annual growth rate was 4.8%, they were still positive. A look at past years shows the variety of the region's rental rate expansion--the highest annual increase of 8.5% in 2000 was 720 basis points more than the low of 1.3% that was recorded for 2005. Back then, landlords aggressively sought out tenants to fill the 9,000 units that were delivered to the market between 2001 and 2004.