With the general belief that the apartment sector hit bottom in the final three months of 2009, several REITs upped their 2010 guidance, albeit conservatively. Given the latest optimistic figures and the somewhat measurable recovery—there was overall improvement in occupancy and effective rents across the board, even in the worst-hit markets—BofA-ML analysts expect most REIT management teams will revisit their expectations for 2010 over the next few quarters.

Revenues exhibited growth in the first quarter, and this trend seems to have been sustained into the second. A survey of more than 15,000 apartment managers across the country show that the pace of month-to-month revenue improvement per available unit held steady in April, rising by 0.9% for the nation's top 20 markets. That's after an 80-basis-point uptick in March and a 90-basis-point increase in February. On an annualized basis, revenue growth held flat in April, following a 1.6% decrease in March and 3.3% drop in February. Effective rents also grew for the top 20 markets by 0.6% in April, though that figure declined by 1.3% year-to-year.

If this pace continues, upward earnings revisions made by some management teams in the first quarter could turn out to be conservative. With the second quarter traditionally bringing with it high demand, BofA-ML believes most REITs will positively revise their 2010 guidance once again.