Although sluggish employment growth has triggered only mild new household formation, apartments are capturing a disproportionately large share of total housing demand, Willett points out. “Interestingly, modest economic growth is good for the apartment industry because it creates some new households, but it doesn’t generate consumer confidence that would result in homebuying,” he tells GlobeSt.

Moreover, MPF Research has found that apartment owners and managers have noted an increase in tenant retention. “When I talk with operators, they say tenant retention is 10 to 20% higher today than the historical norm,” Willett points out. “When people don’t feel confident, the easiest decision is to just stay put.”

Willett adds: “Apartments are certainly not losing renters to homeownership, whether that’s because they can’t quality for a mortgage, they don’t have the confidence in the economy or they’re not sure housing pricing have bottomed… there could be a lot of reasons they’re not buying, but it’s clear that they’re not, and that works in favor of apartments.”

At the same time that demand is surging, deliveries are slowing – another reason why occupancy and rents are increasing, Willett notes. MPF Research indicates that demand for 68,000 units was posted during the third quarter, and year-to-date absorption has totaled 283,000 units, one of the most robust tallies recorded during the past two decades.

Apartment stock additions during the 3rd quarter were limited to about 12,000 units, and new supply finished during the initial nine months of the year was held to approximately 48,000 units. “When you’re adding so few units, you don’t have to lease a huge number to get occupancy to go up,” Willett explains.

With occupancy on the rise, apartment owners have been able to increase rents. “In past cycles, as things started to get better with occupancy, operators were hesitant to push rents,” Willett recalls. “This time around, they just jumped right in with the increases.”

Roughly 75% of the 64 markets that MPF Research monitors reported rent increases this year. The remaining markets saw rents stabilize.

The nation's strongest rent growth during the past year has occurred in El Paso, TX, where rates are up 11.7%. Markets including Albuquerque, N.M., Baltimore, Miami, New York, Pittsburgh, PA, San Jose, CA, Washington D.C. and West Palm Beach, FL, saw year-over-year pricing increases in the range of 4% to 5%.

“Baltimore and D.C. are the markets that are closest to full recovery – back to where we were in 2007,” Willett notes. “That’s not all that surprising since they didn’t take that much of a hit. But there are markets that did take a meaningful hit that have recovered nicely: Portland, OR; Nashville and Denver.”

On the flip side, Las Vegas is the one spot still suffering a notable decline, with rents off 6.3% in early September compared to the same time last year. Dips near 1% remain in place in Atlanta, Houston, Phoenix, Salt Lake City, Seattle and Tampa, FL.

Even in markets where rental growth has been unimpressive, concessions are starting to burn off, Willett says. “Not only has the use of concessions dropped a whole lot, but the size of the concessions also is coming down,” he notes. “Earlier this year, we could have seen more than a month of free rent. Now were down to two weeks or a month at most.”