By the numbers, permits, starts and deliveries are all up. Multifamily building permits rose 60.7% from 107,000 in November 2010 to 172,000 in December 2010, reported the US Department of Commerce, and 18.6% from 145,000 in December 2009. Multifamily starts, meanwhile, hit 102,000 in December 2010, up 26% from 81,000 in November and 31% from 78,000 starts in December 2009. Rosen Consulting Group forecasts 135,000 apartment starts in 2011, after 104,000 starts in 2010. Numbers from the National Association of Home Builders are in similar territory—the organization expects 133,000 starts in 2011, after 114,000 in 2010. Meanwhile, CoStar expects 22,536 units will be added to the market in 2011, followed by 94,588 units in 2012 and at least 109,000 units in 2013.

And though debt has not been readily available in the past year or two, I’ve been hearing from quite a few capital sources that they’d be willing to fund construction projects that fit their lending parameters. Even Fannie Mae, already a dominant player in the multifamily lending arena, is getting back into the development game. The agency recently disclosed that it is reviving its construction loan participation program, where it will buy up to 75% of a construction loan, with the caveat that there would ultimately be a permanent take-out by Fannie.

There’s little doubt that demand will be up for apartments in the near to medium term. Demographic trends are favorable, with immigration on the rise, echo boomers steadily entering the rental pool and a healthy pace of job growth among younger Americans. Homeownership has also lost its luster; the homeownership rate declined from the peak of 69.2% in 2004 to 66.5% at year-end 2010. That number is expected to dip below 65% in the next couple of years. That’s good news for multifamily, which is enjoying single-digit vacancy rates.

But as great as optimism is, history has shown that it can get the apartment market into trouble. Few will argue that multifamily developers have a tendency to get ahead of themselves at the first signs of good news. Yes, demand for rental units is rising and many markets will probably face a shortage of quality product. But for its own sake, the industry must be careful not to flood the market—particularly the class A market—with product. Because as reliable the source may be, there’s no guarantee that any prediction will come true.