Job growth and a rise in demand should give a boost to markets that suffered with low vacancy rates over the past couple of years. But some that fall into this category, including Seattle, Denver and Phoenix, will still have to deal with supply issues. <pSpeaking of job growth, the strongest expansion is expected in Texas in 2010. That would be ideal for developers--that is, if they could just sit still and wait for conditions to improve. Rather, expect to see more deliveries come on line throughout the state, keeping vacancies above average. At number 12, San Antonio came in as the highest-ranked market in the state.

And in Florida, the poster child for the condo crash and overbuilding phenomenon, the recovery is expected to be considerable modest. A soft economy and resulting steep rent declines are forecast for Ft. Lauderdale--number 39, West Palm Beach--number 41 and Jacksonville--number 44. While a true recovery will probably not occur in the Sunshine State in 2010, the firm says, "properties in these areas could offer strong upside for less risk-averse investors who acquire assets this year."

Overall, Marcus & Millichap warns investors not to get too optimistic this year, as the economic headwinds remain formidable. At best, owners and investors will see a muted recovery, since job growth will not be at a breakneck pace. But if inflation is kept at bay and the financial markets begin to stabilize, the lending market will in fact improve, along with corporate and consumer psychology. The wild card, the firm contends, is the looming specter of commercial mortgage maturities, which are in the hundreds of billions of dollars at this point.

In addition to modest upticks in demand and, therefore vacancies and rents--in some markets, a slowdown in overall deliveries bodes well for the national market. Developers will bring 65,000 units to the market this year, down from 94,000 in 2009, and completions in the most oversupplied housing markets, such as Phoenix and Las Vegas, will slip to the lowest levels in years.

Vacancy improvement isn't expected until the second of this year, but is forecasted to end 2010 at 7.8%. And rent growth will lag, asking and effective rents down an average of 1.7% to 3%, respectively, by year's end. Pricing power will be available to only a handful of owners, and not until the second half.

The other weapon of sorts in the multifamily sector's arsenal is the availability of financing from the GSEs, which have maintained their commitment to the asset class. In these incredibly tight capital markets, Fannie Mae and Freddie Mac have become a welcome lifeline for those looking to finance or refinance their properties. But these entities cannot be the only source of capital indefinitely.

Marcus & Millichap expects long-term rates to remain low this year, mortgage rates to stay relatively stable and lenders increasingly opting to work out extensions or modifications for loans rather than taking near-term losses. Seller financing, or assumable debt, will also become a big factor in transactions this year.