The locally based research firm reports that just $2.7 billion of commercial property changed hands in February, with apartments accounting for $600 million of that total. But a look at the number of properties in trouble is a telltale indicator of potential activity. Some $5.7 billion worth of commercial property "spilled into trouble through default, foreclosure or bankruptcy" in February, and the amount of assets on the sales block ballooned as well, coming in at $11 billion across all property types.

Compared to closings, the level of offerings "is rising off the charts." In the apartment sector alone, there were five offerings for every one closing so far this year--a bit higher than the overall market and significantly higher than the one-to-one ratio in ideal times.This supply-demand incongruity is putting downward pressure on prices, and this "is likely to only worsen over the near term since behind the statistics are sellers that are rapidly morphing from pressured to distressed, while buyers are content to wait," say RCA analysts.

The individual sales that are getting done are also shrinking. The largest property to sell in February traded for just $40 million. Yet REITs were able to shed some assets in packages, however modest. Equity Residential sold four communities in Hartford, while Aimco flipped portfolios in San Antonio and Indianapolis.

With little pressure to snap up assets, and with sellers still holding the line on price tags, buyers are sitting tight on the sidelines, rather than taking the risk of entering the market too soon. While buyers bide their time, the inventory of available offerings continues to balloon. Further, RCA notes, the imbalance between offerings and closings is greater for garden apartments than for mid and high-rise communities.

The discrepancy between offerings and closings also varies by market. In the West and some tertiary regions, for instance, one property trades for every three properties that are put on the market. The differences are even clearer in individual markets, particularly areas that have been hit with a lot of overbuilding and conversion. In Phoenix, for one, only five sales closed between Oct. 1, 2008 and February, accounting for $118 million in volume. At the same time, 42 new communities worth $769 million were put on the block.

They may not be drastically lowering their prices, but multifamily sellers have made some adjustments, bringing cap rates up 30 basis points so far this year. And there are signs that sellers are gradually lowering their expectations in the amount of discount to asking price they're willing to accept. In 2007, the discount stood close to 94%, whereas today, it's below 90%.

"Pressure to sell is on every capital sector, but sellers have been slow to adjust to a rapidly falling market," says RCA. "However, a new breed of sellers--the truly distressed--should help close this gap more quickly."

Primarily made up of capital sources who find themselves the owners of the collateral they lent on, these distressed sellers are dumping an increasing number of assets on the market. Since September, 6% of all multifamily sales have involved distressed situations. There are 1,022 apartment properties worth $10.6 billion in the distressed pool, and that figure is growing by $1.5 billion (120 properties) each month.

"This amount of trouble adds further pressure to a market that is already way out of balance, but an influx of more realistic and distressed sellers may also serve to break the stalemate that has brought sales to a halt," and bring average sales prices down as well, according to the firm.