And in Northern New Jersey, proximity to large employers and double-digit declines in prices have maintained buyer interest, the report finds. In Union City, for example, the median price has dipped approximately 12% year-over-year, but velocity remains steady, as the area's discounted assets and closeness to New York City are attracting investors.

In Central and Southern New Jersey, buyers are waiting for clearer signs of job and rental market stabilization before deploying capital. Nevertheless, some investors are staying active, spurred by cap rates in the high-7% range in Middlesex County and initial yields near 9% in Camden County.

According to Marcus & Millichap, an uptick in foreclosure initiations is expected to yield investment opportunities in distressed assets in Hudson, Essex and Union counties. Fire-sale expectations are unrealistic, though, as many of these sales will be due to overextended owners, rather than negative cash flows.

Still, compared to other core property sectors, apartments have fared best due to the availability of financing through government-sponsored enterprises Fannie Mae and Freddie Mac. However, recent modifications to GSE guidelines will impact lender decisions since borrower requirements include more substantial apartment ownership experience, according to William E. Hughes, senior vice president of Marcus & Millichap Capital Corp.

He adds that loan-to-value requirements range from 55% to 75%. "Portfolio lenders are issuing loans at all-in rates of 6% to 6.75% for a five-year term and 6.9% to 8% for a 10-year term. Rates among agency lenders are roughly 100 basis points to 150 basis points lower," says Hughes. "The government's creation of a conservatorship for Fannie Mae and Freddie Mac has most likely boosted confidence in the two GSEs, putting downward pressure on rates, but it also creates several near-term uncertainties since the conservatorship is due to expire at the end of the year."