Kicking off the investment panel, “Reality Check: Have Valuations Really Firmed or Are We in Bubble 2.0?,” moderator Matthew Lawton, an executive managing director with HFF, commented, “It’s nice to be out of the year of low forma and crash flow.”

The panelists seemed to echo that sentiment, as they outlined their bullish plans for 2011 and 2012. Mark Alfieri, COO of Multifamily for Behringer Harvard, said that forecasted decreases in concessions in most markets, would lead to higher effective rents. “Anyone buying today is pricing in substantial rent growth,” he said. “Our modeling shows us getting back to 2006 rents by the end of 2012, so still have a ways to go.” Behringer Harvard plans to buy another $1 billion to $1.5 billion in assets in 2011 and 2012.

Because AMLI Residential Properties is a net effective shop, it doesn’t offer concessions, said chairman and CEO Greg Mutz. But the firm is expecting 6% revenue growth this year. In its worst-performing markets, it’s expecting 2% to 3% rent growth in 2011. The top markets may see as much as 12% to 13%.

In the top markets, Steve Zaleski, managing director of the multihousing group for CB Richard Ellis Investors, sees 5% to 8% rent growth, and expects the worst markets to post growth of 1% to 2% in 2011-2012. And TRECAP Partners managing director Michael McNamara is currently underwriting 4% to 5% rent growth in most markets. TRECAP bought a little over 200,000 units this past year and is in the process of raising capital for a value-added multifamily-focused fund.

After Mutz and Zaleski revealed plans to develop about $1 billion worth of product over the next couple of years, McNamara commented that there’s a disconnect between those plans and where supply is. But, Zaleski countered, “In some cases, the pricing has gone above what we can build for, so we’re focusing on building.” But, he added, that’s the case only in markets such as Boston and San Diego, not areas like the Southeast.

Alfieri concurred: “I’ve rarely before seen a market where people are willing to buy so close to replacement costs at such low cap rates.” He says his firm is still finding opportunities out there, but not in high barrier-to-entry markets.

Despite the narrow gap between replacement cost and purchase price, McNamara denied any thoughts of a bubble. “If employment picks up, rents in these markets are going to move up.”

Though his firm tends to underwrite a minimum of 5.5% rent growth for its deals, Zaleski has higher expectations. “With job growth, we’re going to see double-digit rent growth in many of these markets,” he said.

Some of the speakers were even stunned at the sector’s performance. “It’s amazing to me that we have come so far in a year,” in terms of prices, cap rates and fundamentals, said McNamara.

That’s probably what’s keeping demand for the sector high, particularly from the institutional side. There’s strong interest in multifamily from a host of investors simply because it has the strongest fundamentals of all product types, said Mutz. But that’s also made it difficult to find deals.

Most investors have also had to adjust their return expectations. Whereas last year, Behringer was looking at 12% to 13% returns on deals at 60% leverage, that number is more like 9% to 12% these days, given a seven-year hold. Unlevered returns are probably in the 7% range, Alfieri added. That’s all mainly because deals have gotten very difficult to underwrite.

But has that led these firms to look outside of their core markets to get better numbers? Not necessarily. As McNamara puts it, “Chasing yield is like chasing a car down the freeway. At some point, you’re going to get trampled. Having a business plan that focuses on secondary markets—that’s fine. But going into them because your original business plan didn’t work out—that’s a bad idea.”